Answer:
2021 inventory balance using dollar-value LIFO = $1,384,025
Explanation:
Note: Before answering the question, the data in it are sorted first as follows:
Year ended December 31 Inventory at End-of-year Prices Price Index
2019 $ 654000 1.00
2020 1261000 1.05
2021 1345250 1.10
The explanation of the answer is now given as follows:
Change in inventory in 2020 = Inventory at End-of-year Prices in 2020 - Inventory at End-of-year Prices in 2019 = $1,261,000 - $654,000 = $607,000
Change in inventory in 2021 = Inventory at End-of-year Prices in 2021 - Inventory at End-of-year Prices in 2020 = $1,345,250 - $1,261,000 = $84,250
2021 inventory balance using dollar-value LIFO = (Inventory at End-of-year Prices in 2019 * Price Index in 2019) + (Change in inventory in 2020 * Price Index in 2020) + (Change in inventory in 2021 * Price Index in 2021) = ($654000 * 1.00) + ($607,000 * 1.05) + ($84,250 * 1.10) = $1,384,025
