Answer:
The ending inventory under the dollar-value LIFO method is $1,554,000.
Explanation:
The dollar-value LIFO method can be described as a variation on the last in, first out (LIFO) method which focuses on the estimation of a conversion price index that can be employed to compare the year-end inventory to the base year cost.
The ending inventory under the dollar-value LIFO method can be calculated as follows:
Beginning inventory at begining price level = $1,400,000
Ending inventory at ending price level = $1,694,000
Beginning price level = 100
Ending price level = 110
Beginning price index = Beginning price level / Beginning price level = 100 / 100 = 1.0
Ending price index = Ending price level / Beginning price level = 110 / 100 = 1.1
Ending inventory at base year prices = Ending inventory at ending price level / Ending price index = $1,694,000 / 1.1 = $1,540,000
Real-dollar quantity increase in inventory = Ending inventory at base year prices - Beginning inventory = $1,540,000 - $1,400,000 = $140,000
Value of real dollar quantity increase in inventory = Real dollar quantity increase in inventory * Ending price index = $140,000 * 1.1 = $154,000
Dollar value LIFO Ending inventory = Beginning inventory at begining price level + Value of real dollar quantity increase in inventory = $1,400,000 + $154,000 = $1,554,000
Therefore, the ending inventory under the dollar-value LIFO method is $1,554,000.
