Question

In 2005, Cobb adopted the dollar-value LIFO inventory method. At that time, Cobb's ending inventory had a base-year cost and an end-of-year cost of $300,000. In 2006, the ending inventory had a $400,000 base-year cost and a $440,000 end-of-year cost. What dollar-value LIFO inventory cost would be reported in Cobb's December 31, 2006, balance sheet?

Answer 1

Answer:

$410,000

Explanation:

The computation of the ending inventory under the LIFO method is shown below:

= Year end cost + difference of amount  × price level index

where,

Year end cost = Beginning cost

Difference of amount = $400,000 - $300,000 = $100,000

Price level index = $440,000 ÷ $400,000 = 1.1

So, the inventory cost is

= $300,000 + $100,000 × 1.1

= $300,000 + $110,000

= $410,000