Question

On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $101,300. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below:

Year-end	Ending inventory at year-end costs				Cost Index
2018	$	130,095				1.05
2019		148,720				1.10
2020		159,060				1.20

What inventory balance should Badger report on its 12/31/2018 balance sheet?

$129,900

$125,030

$123,900

$101,300

Answer 1

Solution:

Computation of inventory at base year prices and change from prior year - Badger Inc.
Date	Inventory at end of year prices	Price index (Percentage)	Inventory at base year prices	Change from Prior Years
1-Jan-18	$101,300.00	100	$101,300.00	$0.00
31-Dec-18	$130,095.00	105	$123,900.00	$22,600.00
31-Dec-19	$148,720.00	110	$135,200.00	$11,300.00
31-Dec-20	$159,060.00	120	$132,550.00	-$2,650.00

Computation of dollar value inventory - LIFO
Particulars	Amount
December 31, 2018:
$101,300*$1	$101,300.00
$22,600*1.05	$23,730.00
December 31, 2018:	$125,030.00

Hence 2nd option is correct.