Answer:
Avondale Lumber
Calculation of Inventory Amounts at the end of each year:
= Inventory cost divided by the Index:
2021: = $408,450/1.05 = $389,000
2022: = $420,740/1.09 = $386,000
2023: = $478,500/1.10 = $435,000
2024: = $513,585/1.13 = $454,500
Explanation:
a) Data and Calculations:
Year Ended Inventory Cost Index Year-End Costs
(Relative to Base Year)
2021 $ 408,450 1.05 $389,000 (408,450/1.05)
2022 420,740 1.09 $386,000 (420,740/1.09)
2023 478,500 1.10 $435,000 (478,500/1.10)
2024 513,585 1.13 $454,500 (513,585/1.13)
b) The conversion of the ending inventory cost to the base year with an index is obtained by dividing the inventory cost by the index. This gives a cost that is relative to the base year.
