Question

Problem 8-11

Pina 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			$81,300			100
Dec. 31, 2014			114,704			107
Dec. 31, 2015			111,386			122
Dec. 31, 2016			134,463			133
Dec. 31, 2017			152,581			143
Dec. 31, 2018			180,708			148

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

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

Year	Ending inventory
2013	81300
2014	(114704/1.07) = (81300*1+25900*1.07) = 109013
2015	(111386/1.22) = (81300*1+10000*1.07) = 92000
2016	(134463/1.33) = (81300*1+10000*1.07+9800*1.33) = 105034
2017	(152581/1.43) = (81300*1+10000*1.07+9800*1.33+5600*1.43) = 113042
2018	(180708/1.48) = (81300*1+10000*1.07+9800*1.33+5600*1.43+15400*1.48) = 135834