Question

Kingston Company uses the dollar-value LIFO method of computing inventory. An external price index is used to convert ending inventory to base year. The company began operations on January 1, 2018, with an inventory of $255,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:

Year Ending inventory at year end costs cost index

2018 319,300 1.03

2019 406,560 1.12

2020 384,770 1.09

2021 372,750 1.05

What are the inventory at year end cost, year end cost index, inventory layers at base year cost, inventory layers at base year cost, year end cost index, and inventory layers converted to cost for : 1/1/18, 12/31/18, 12/21/19, 12/31/20, and 12/31/21

Answer 1

Calculate following :

	inventory at year end cost	/	Year end cost index	=	inventory layers at base year cost	Year	inventory layers at base year cost	*	Year end cost index	=	inventory layers converted to cost for
1/1/18	255000	/	1	=	255000		255000	*	1	=	255000
12/31/2018	319300	/	1.03	=	310000		255000	*	1	=	255000
						2018	55000	*	1.03	=	56650	311650
12/31/2019	406560	/	1.12	=	363000		255000	*	1	=	255000
						2018	55000	*	1.03	=	56650
						2019	53000	*	1.12	=	59360	371010
12/31/2020	384770	/	1.09	=	353000		255000	*	1	=	255000
						2018	55000	*	1.03	=	56650
						2019	43000	*	1.12	=	48160	359810
12/31/2021	372750	/	1.05	=	355000		255000	*	1	=	255000
						2018	55000	*	1.03	=	56650
						2019	45000	*	1.12	=	50400	362050