Question

Giddens Company adopted the​ dollar-value LIFO inventory method on December​ 31, Year 1. On December​ 31, Year​ 1, Giddens' inventory was in a single inventory pool and was valued at​ $400,000 under the​ dollar-value LIFO method. Inventory data for Year 2 are as​ follows:
12/31 Year 2 inventory at year-end prices $550,000
Price index at 12/31 Year 2 (base year Year 1) 110

​Giddens' inventory at​ dollar-value LIFO at December​ 31, Year 2​ is:

Answer 1

Answer:

The value of inventory at Dollar value LIFO is $510,000

Explanation:

dollar-value LIFO method

This is one of the techniques use to integrate inventory items into pool and then valuation is applied on pool rater than on individual item

To calculate the dollar value of ending inventory

we must

Determine value of ending inventory

Determine the difference between ending inventory and beginning inventory at the price of previous year

Determine the difference between ending inventory and beginning inventory at the current price

Add beginning inventory and difference at the current price to get the value of ending inventory on the basis of dollar value LIFO method

The information related to inventory of the company for the current year is given as follows

Beginning inventory is $400,000

Base price index is 100

Ending inventory at current price index is $550,000

Current price index is 110

INVENTORY VALUE AT DOLLAR VALUE LIFO IS CALCULATED AS FOLLOWS

Ending inventory value at base price index = $$550,000\times\frac{100}{110}$

= $500,000

The increase in inventory at base price index is $500,000 - $400,000

= $100,000

The increase in inventory at current price index is $100,000 × $\frac{110}{100}$

= $110,000

Calculate inventory at end

inventory at end = inventory at the beginning + increase in inventory at current price

$400,000+$110,000

= $510,000

Therefore, value of inventory at Dollar value LIFO is $510,000