Question

Enya Corp. adopted the dollar-value LIFO method on January 1, 2008. Its inventory on that date was $160,000. On December 31, 2008, the inventory at prices existing on that date amounted to $140,000. The price level at January 1, 2008, was 100, and the price level at December 31, 2008, was 112.
Instructions
(a) Compute the amount of the inventory at December 31, 2008, under the dollar-value LIFO method.
(b) On December 31, 2009, the inventory at prices existing on that date was $172,500, and the price level was 115. Compute the inventory on that date under the dollar-value LIFO method.

Answer 1

Answer:

Option (a) =$28750  option (b) = $28750

The value of the inventory is= $153750

Explanation:

From the given question we solve for the options (a) and (b) below.

Date  1  January 2008    

Inventory at the end of year prices = $160,000

Price Index = 100

Inventory at Base year prices =$160,000

Change from previous year = 0

December 31st 2008

Inventory at the end of year prices  =$140,000

Price Index = 112

Inventory at Base year prices =$125000

Change from previous year = (35000)

31 December 2018

Inventory at the end of year prices = $172500

Price Index = 115

Inventory at Base year prices= $150000

Change from previous year = 25000

Now we solve for,

(a) Inventory at 31 December 2008

In the year 2008 there is LIFO liquidation (35000), so the  inventory value under dollar value LIFO method;

$125000 x 1 = $125000

(b)Inventory at 31 December 2009:

$125000 x 1 = $125000

$25000 x 1.15 = $28750

Thus value of inventory ($125000 + $28750) = $153750