Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data fo

Question

Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow.

Year Ended
December 31 Inventory at
Current-Year Cost Price
Index 2013 $18,600 100 2014 20,952 108 2015 25,308 114
Compute the value of the 2014 and 2015 inventories using the dollar-value LIFO method.

2014 2015 Inventory under LIFO $ $ Click if you would like to Show Work for this question: Open Show Work
Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow.

Year Ended
December 31 Inventory at
Current-Year Cost Price
Index 2013 $18,600 100 2014 20,952 108 2015 25,308 114
Compute the value of the 2014 and 2015 inventories using the dollar-value LIFO method.

2014 2015 Inventory under LIFO $ $ Year Ended
December 31 Inventory at
Current-Year Cost Price
Index $ $ Open Show Work
Year Ended
December 31 Inventory at
Current-Year Cost Price
Index 2013 $18,600 100 2014 20,952 108 2015 25,308 114

Explanation / Answer

First of all, we need to compute the value of ending inventory at base-year-prices. It is computed using the following formula:

2014

18600 @1 = 18600

800@1.08 = 864

2015

18600 @1 = 18600

800@1.08 = 864

2800 @1.14= 3192

Date Inventory at
end-of-year prices Price index
Invetory at base-year-prices Change
from prior year 2013 18,600 100 18600 0 2014 20,952 108 19400 800 2015 25,308 114 22200 2,800

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