Question

On January 1, 2020, Tamarisk Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Tamarisk continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Tamarisk uses internal conversion price indexes and the multiple pools approach under which substantially identical inventory items are grouped into LIFO inventory pools. The following data were available for inventory pool no. 1, which comprises products A and B, for the 2 years following the adoption of LIFO.

		FIFO Basis per Records
		Units		Unit Cost		Total Cost
Inventory, 1/1/20
Product A		11,000		$30		$330,000
Product B		9,900		25		247,500
						$577,500
Inventory, 12/31/20
Product A		18,150		36		$653,400
Product B		9,900		26		257,400
						$910,800
Inventory, 12/31/21
Product A		14,300		40		$572,000
Product B		11,000		32		352,000
						$924,000

Compute the internal conversion price indexes for 2020 and 2021. (Round price index to 2 decimal places, e.g. 1.62.)

		2020		2021
Conversion price index

compute the inventory amount of December 31, 2020, and 2021  using the dollar-value LIFO inventory method Round price index to 2 decimal places, e.g. 1.62.)

inventory 2020? 2021?

by steps please do not jump, please

Answer 1

1. For year 2020,

Product A: 18150* 30(base year price)=544500

ProductbB: 9900*25(base year price)= 247500

Total value of inventory= 544500+247500= 792000

conversion price index= 910800÷792000= 1.15

Value of inventory as on 31/12/2020= 910800*1.15= 1047420

2. For year 2021,

Product A: 14300*30(base year price)= 429000

Product B: 11000*25(base year price)= 275000

Total value of inventory= 429000+275000= 704000

conversion price index= 924000÷704000= 1.31

value of inventory as on 31/12/2021= 924000*1.31= 1210440

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