Sweet Company adopted the dollar-value LIFO method on January 1, 2017 (using int
ID: 2411661 • Letter: S
Question
Sweet Company adopted the dollar-value LIFO method on January 1, 2017 (using internal price indexes and multiple pools). The following data are available for inventory pool A for the 2 years following adoption of LIFO.
Inventory
At Base-Year
Cost
At Current-Year
Cost
Computing an internal price index and using the dollar-value LIFO method, at what amount should the inventory be reported at December 31, 2018?
Inventory
At Base-Year
Cost
At Current-Year
Cost
Explanation / Answer
Answer-1:
Price Index = (Cost at current year prices/ Cost at base year prices) * 100
Inventory Date
Base Year Cost
At current year cost
Price Index (%)
January 1, 2017
199700
199700
100
December 31, 2017
244600
293520
120
December 31, 2018
278100
344844
124
Answer-2:
Beginning Value of Inventory on 1/1/2017
199700
Increase during 2017 in terms of 2017 price index
(244600 - 199700) * 120%
53880
Increase during 2018 in terms of 2018 price index
(278100 - 244600) * 124%)
41540
Dollar Value LIFO Inventory on December 31, 2018
295120
Inventory Date
Base Year Cost
At current year cost
Price Index (%)
January 1, 2017
199700
199700
100
December 31, 2017
244600
293520
120
December 31, 2018
278100
344844
124
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