Inventory at Price index Cost of goods manufactured
Year year-end prices (base year 2012) during the year
2016 $36,432 1.012 $172,000
2017 $34,371 1.026 $195,000
2018 $38,110 1.030 $208,000
Compute the inventory at December 31, 2016, 2017 and 2018 AND the cost of goods sold for each year assuming Diane uses the dollar-value LIFO method for each year.
Solution:
| Diane | ||||
| Computation of inventory at base year prices and change from prior year | ||||
| Year end | Inventory at end of year prices | Cost index (Percentage) | Inventory at base year prices | Change from Prior Years |
| 2015 | $35,000 | 1 | $35,000 | $0 |
| 2016 | $36,432 | 1.012 | $36,000 | $1,000 |
| 2017 | $34,371 | 1.026 | $33,500 | -$2,500 |
| 2018 | $38,110 | 1.030 | $37,000 | $3,500 |
| Computation of dollar value inventory - LIFO | |
| Particulars | Amount |
| December 31, 2016: | |
| $35000*1 | $35,000 |
| $1000*1.012 | $1,012 |
| Inventory at Dec 31, 2016 | $36,012 |
| December 31, 2017: | |
| ($35000- $1500)*$1 | $33,500 |
| ($1000-1000)*1.012 | $0 |
| Inventory at Dec 31, 2017 | $33,500 |
| December 31, 2018: | |
| ($35000- $1500)*$1 | $33,500 |
| $3500*1.030 | $3,605 |
| Inventory at Dec 31, 2018 | $37,105 |
| Computation of Cost of Goods sold | ||||
| Year | Cost of goods manufactured | beginning Inventory | Ending Inventory | Cost of good sold |
| 2016 | $1,72,000 | $35,000 | $36,012 | $1,70,988 |
| 2017 | $1,95,000 | $36,012 | $33,500 | $1,97,512 |
| 2018 | $2,08,000 | $33,500 | $37,105 | $2,04,395 |
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