Problem 2 Aber Company manufactures one product. On December 31, 2015, Aber adop

Question

Problem 2

Aber Company manufactures one product. On December 31, 2015, 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:

                                           Inventory at                           Price index

            Year                    year-end prices                   (base year 2009)

            2016                         $378,000                                   1.05

            2017                           552,000                                   1.15

            2018                           575,000                                   1.25

Instructions

Compute the inventory at December 31, 2016, 2017, and 2018, using the dollar-value LIFO method for each year

Explanation / Answer

Aber Company
Dollar-Value LIFO Computations
At December 31, 2016, 2017, and 2018

Ending Layers at
Inventory at Base-Year Ending Inventory
Base-Year Price Prices Price Index Dollar-Value LIFO
At 12/31, $378,000 ÷ 1.05 $270,000 × 1.00 = $270,000
2016: = $360,000 $90,000 × 1.05 = $94,500
  $364,500

At 12/31, $552,000 ÷ 1.15 $270,000 × 1.00 = $270,000
2017: = $480,000 $90,000 × 1.05 = $94,500 $120,000 × 1.15 = $138,000
  $502,500

At 12/31, $575,000 ÷ 1.25 $270,000 × 1.00 = $270,000
2018: = $460,000 $90,000 × 1.05 = $94,500 $100,000 × 1.15 = $115,000
$479,500

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