Question
On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this...
On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. 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 |
$ |
126,000 |
1.05 |
||||
|
2019 |
130,000 |
1.10 |
|||||
|
2020 |
153,600 |
1.20 |
|||||
In determining the inventory balance should Badger report in its 12/31/2019 balance sheet:
A) An additional layer of $23,000 is added to the 1/1/2019 balance.
B) An additional layer of $22,000 is added to the 1/1/2019 balance.
C) An additional layer of $11,000 is added to the 1/1/2019 balance.
D) None of these answer choices are correct.
Answer: C
Explanation: $143,000 ÷ 1.10 = $130,000. This includes the previous two layers, the first at $100,000 and the second at $20,000, plus another at $10,000. The third is then brought forward to 12/31/2019 by $10,000 × 1.10 = $11,000.
Can someone please explain where 143,000 is coming from?
Please solve this with clear steps & explainations shown as the given explaination doesn't make sense to me. Why isn't 130,0000 being divided by 1.1??
Homework Answers
Answer #1
Solution:-
C) An additional layer of $11,000 is added to the 1/1/2019 balance.
Explanation:-
Please check value of 2019's Ending inventory at year-end costs it should be 143,000.
So 143,000 / 1.10 = 130,000.
| Firse layer (January 1, 2018) inventory cost | 100,000 |
| Second layer (126,000 / 1.05) - 100,000 | 20,000 |
| Third layer (for 2019) (143,000 / 1.10) - (126,000 / 1.05) | 10,000 |
| The third is then brought forward to 12/31/2019 by 10,000 * 1.10 | $11,000 |
If
you keep 130,000 as 2019 Ending inventory at year-end costs than
answer would be
D) None of these answer choices are correct.
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