Problem #5 (9 %) Dollar Value LIFO Archer Company manufactures one product. On D

Question

Problem #5 (9 %) Dollar Value LIFO Archer Company manufactures one product. On December 31, 2013, Archer adopted the dollar- value LIFO inventory method. The inventory on that date using the dollar-value LIFO invent method was S450,000. Inventory data are as follows: ory Year 2014 2015 2016 Inventory at year-end prices S630,000 920,000 950,000 Price index (base year 2009) 1.05 1.15 1.25 Instructions Compute the inventory at December 31, 2014. 2015, and 2016 using the dollar-value LIFO method for each year, and note any years in which there was LIFO liquidation (circle or asterisk).

Explanation / Answer

Year

Inventory at end of year prices

Price Index

Inventory at base year prices

Change from prior year

2013

450000

1.00

450000

0

2014

630000

1.05

630000*1/1.05 = 600000

150000

2015

920000

1.15

920000*1/1.15 = 800000

200000

2016

950000

1.25

950000*1/1.25 = 760000

(40000)

Computation of dollar value inventory:

2013:

450000 @ 1.00 = 450000

2014:

450000 @ 1.00 = 450000

150000 @ 1.05 = 157500

Total = 607500

2015:

450000 @ 1.00 = 450000

150000 @ 1.05 = 157500

200000 @ 1.15 = 230000

Total = 837500

2016:

450000 @ 1.00 = 450000

150000 @ 1.05 = 157500

160000 @ 1.15 = 184000

Total = 791500

Year

Inventory at end of year prices

Price Index

Inventory at base year prices

Change from prior year

2013

450000

1.00

450000

0

2014

630000

1.05

630000*1/1.05 = 600000

150000

2015

920000

1.15

920000*1/1.15 = 800000

200000

2016

950000

1.25

950000*1/1.25 = 760000

(40000)

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