Question

Part A. Judd Company has a beginning inventory in year one of $1,400,000 and an ending inventory of $1,694,000. The price level has increased from 100 at the beginning of the year to 108 at the end of year one. Calculate the ending inventory under the dollar-value LIFO method. $__________

Part B. At the end of year two, Judd's inventory is $1,886,000 in terms of a price level of 114 which exists at the end of year two. Calculate the inventory at the end of year two continuing the use of the dollar-value LIFO method. $_____

Answer 1

Part-a)Given that:

Inventory beginning of year =$1400000

Ending inventory =$1694000

Price level increase from 100 to 108

Under doller value LIFO method

Ending inventory at bade year price = $1694000/1.08 = $1568518.52

Inventory increase =$1568518.52-$1400000

=$168518

Price index for increase of inventory =$168518*1.08

=$182000

Therefore ending inventory under doller value LIFO method for year-1 = $1400000+$182000

=$1582000

Part -b)

Given that:

Ending inventory =$1886000

Price level = 114

Ending inventory at base year =$1886000/1.14

=$1654385 .96

Base year =$ 1400000*1.08

=$1512000

Increase in inventory =$1654385.96 -$1512000

=$142385

Price index for increase of inventory =$142385*1.15 =$163742.75

Therefore ending inventory for year-2 =$1400000+$163742.75

=$1563742.75