Answer:
Richardson Company
A. Ending inventory for 2010 through 2015 using dollar-value LIFO:
Date (End-of-Year Prices) Price Dollar value LIFO
Index
Dec, 31,2010 $80,000 100 $80,000
Dec. 31, 2011 111,300 105 106,000
Dec. 31, 2012 108,000 120 90,000
Dec. 31, 2013 128,700 130 99,000
Dec. 31, 2014 147,000 140 105,000
Dec. 31, 2015 174,000 145 120,000
B. Companies use the dollar-value LIFO method to determine their ending inventory values based on year-to-year changes to the dollar value of the inventories after including the effects of inflation. To determine the dollar-value LIFO of inventory, take the end of the year inventory price and divide it by its price index and multiply by the base year index. This process removes the effect of inflation on the value of the ending inventory.
Explanation:
a) Data and Calculations:
Ending Inventory
Date (End-of-Year Prices) Price Dollar value LIFO
Index
Dec, 31,2010 $80,000 100 $80,000 ($80,000*100/100)
Dec. 31, 2011 111,300 105 106,000 ($111,300*100/105)
Dec. 31, 2012 108,000 120 90,000 ($108,000*100/120)
Dec. 31, 2013 128,700 130 99,000 ($128,700*100/130)
Dec. 31, 2014 147,000 140 105,000 ($147,000*100/140)
Dec. 31, 2015 174,000 145 120,000 *$174,000*100/145)
