Question

The dollar-value LIFO method was adopted by Sheridan Corp. on January 1, 2017. Its inventory on that date was $423,000. On December 31, 2017, the inventory at prices existing on that date amounted to $403,200. The price level at January 1, 2017, was 100, and the price level at December 31, 2017, was 112.

a) Compute the amount of the inventory at December 31, 2017, under the dollar-value LIFO method.

Inventory 12/31/17 under dollar-value LIFO method

b) On December 31, 2018, the inventory at prices existing on that date was $442,635, and the price level was 115. Compute the inventory on that date under the dollar-value LIFO method.

Inventory 12/31/18 under dollar-value LIFO method

Answer 1

Date	Ending inventory at base year cost	Inventory at base year cost	Inventory layers converted to cost	Ending inventory LIFO cost
01/01/2017	$423,000 / 1 = $423,000	$423,000 (base)	$423,000 x 1	$423,000
Ending inventory on January 1, 2017				$423,000
31/12/2017	$403,200 / 1.12 = $360,000	$423,000 (base)	$360,000 x 1	$360,000
Ending inventory on December 31, 2017				$360,000
31/12/2018	$442,635 / 1.15 = $384,900	$360,000 (base)	$360,000 x 1	$360,000
		$24,900 (2018)	$24,900 x 1.15	28,635
Ending inventory on December 31, 2018				$388,635