Aber Company manufactures one product. On December 31,2011. Aber adopted the dol

Question

Aber Company manufactures one product. On December 31,2011. Aber adopted the dollar value LIFO inventory method. The inventory on that date using the dollar value LIFO inventory method was $270,000. Inventory data are as follows:

YEAR                                YEAR END PRICES                    PRICE INDEX(BASE YEAR 2009)

2012 378,000 1.05

2013 552,000 1.15

2014 575,000 1.25

1) What was the increase in inventory in 2012 in base year dollars?

2) What was the ending inventory balance sheet for 2013?

3) What was the ending balance in layer 3 inventory in base year dollars( following the 2014 reduction)?

Solve and explain in detail

Explanation / Answer

1.Increase in inventory in 2012 =$378,000/1.05 less $270,000

=360,000-270,000

=$90,000

2.Ending inventory balance sheet for 2013 : $552,000/1.15 =$480,000

3.Ending balance in layer 3 inventory in base year dollars =$575000/1.25 =$460,000

Reduction as compared to 2013 :$20,000

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