Question

Whispering Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works.

He has provided you with the following information about purchases made over a 6-year period.

Date		Ending Inventory (End-of-Year Prices)				Price Index
Dec. 31, 2013			$72,900			100
Dec. 31, 2014			136,896			124
Dec. 31, 2015			133,906			142
Dec. 31, 2016			158,202			153
Dec. 31, 2017			180,345			165
Dec. 31, 2018			213,921			171

You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value.

Compute the ending inventory for Richardson Company for 2013 through 2018 using dollar-value LIFO.

Answer 1

Computation of inventory at base year prices and change from prior year - Whispering Company
Date	Inventory at end of year prices	Price index (Percentage)	Inventory at base year prices	Change from Prior Years
31-Dec-13	$72,900	100	$72,900	$0
31-Dec-14	$136,896	124	$110,400	$37,500
31-Dec-15	$133,906	142	$94,300	($16,100)
31-Dec-16	$158,202	153	$103,400	$9,100
31-Dec-17	$180,345	165	$109,300	$5,900
31-Dec-18	$213,921	171	$125,100	$15,800
Computation of dollar value inventory - LIFO
Particulars	Amount
December 31, 2013:
$72900*$1	$72,900
December 31, 2014:
$72900*1	$72,900
$37500*1.24	$46,500
Inventory at Dec 31, 2014	$116,625
December 31, 2015:
$72900*$1	$72,900
$21400*1.24	$26,536
Inventory at Dec 31, 2015	$99,436
December 31, 2016:
$72900*$1	$72,900
$21400*1.24	$26,536
$9,100*1.53	$13,923
Inventory at Dec 31, 2016	$113,359
December 31, 2017:
$72900*$1	$72,900
$21400*1.24	$26,536
$9,100*1.53	$13,923
$5,900*1.65	$9,735
Inventory at Dec 31, 2017	$123,094
December 31, 2018:
$72900*$1	$72,900
$21400*1.24	$265,364
$9,100*1.53	$13,923
$5,900*1.65	$9,735
$15,800*1.71	$27,018
Inventory at Dec 31, 2018	$388,940