Summary Business Accounting

Question:

At the beginning of 2013, a company adopts the dollar-value LIFO inventory method for its one inventory

pool. The pool’s value on that date was $1,400,000. The 2013 ending inventory valued at year-end costs

was $1,664,000 and the year-end cost index was 1.04. Calculate the inventory value at the end of 2013

using the dollar-value LIFO method.



Answer:



Ending Inventory Inventory Layers Inventory Layers Inventory

Date at Base Year Cost at Base Year Cost Converted to Cost DVL Cost



1/1/13 $1,400,000

= $1,400,000$1,400,000 (base) $1,400,000 x 1.00 =$1,400,000

$1,400,000

1.00




12/31/13 $1,664,000

= $1,600,000$1,400,000 (base) $1,400,000 x 1.00 = $1,400,000

1.04 200,000 (2013) 200,000 x 1.04 = 208,000

$1,608,000