Question

ABC Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2019. Its inventory at that date was $1,000,000 and the relevant price index was 1.00. Information regarding inventory for subsequent years is as follows: Date Inventory at Current Year Prices Price Index 12/31/2019 1,000,000 1.00 12/31/2020 1,285,200 1.08 12/31/2021 1,439,100 1.23 12/31/2022 1,625,000 1.30 What is the cost of the ending inventory at December 31, 2021 under dollar-value LIFO

Answer 1

Answer:

$1,209,100

Explanation:

The computation of the cost of the ending inventory as on Dec 31,2021 is shown below:

= Inventory as on Dec 31,2019 + {(Inventory as on Dec 31,2021 ÷ 2021 price index × 2019 price index) - Inventory as on Dec 31,2019} × 2021 price index ÷ 2019 price index

= $1,000,000 + {($1,439,100 ÷ 1.23 × 1) - $1,000,000} × 1.23 ÷ 1

= $1,000,000 + ($1,170,000 - $1,000,000) × 1.23

= $1,000,000 + $209,100

= $1,209,100