Problem 4 Frederick Company adopted the dollar-value LIFO method on January 1, 2

Question

Problem 4

Frederick Company adopted the dollar-value LIFO method on January 1, 2015 (using internal price indexes and multiple pools). The following data are available for inventory pool A for the 2 years following adoption of LIFO.

At Base-         At Current-    Price

Inventory                    Year Cost       Year Cost       Index

1/1/15                          $100,000         $100,000         100

12/31/15                      120,000         126,000         105

12/31/16                      128,000         143,360         112

Using the dollar-value LIFO method, at what amount should the inventory be reported at December 31, 2016?

Problem 4

Computation of price indexes:

12/31/15

12/31/16

            Dollar-value LIFO inventory 12/31/15:

Dollar-value LIFO inventory

            Dollar-value LIFO inventory 12/31/16:

Dollar-value LIFO inventory

12/31/15

Explanation / Answer

31-12-2015

$ 1,20,000 / 1.05 = $ 1,14,286

                   $ 1,00,000 * 1.00 = $ 1,00,000

                   $ 14,286 * 1.05      = $ 15,000

                                                    $ 1,15,000

**( $ 1,14,286 - $ 1,00,000 = $ 14,286 )

31-12-2016

$ 1,28,000 / 1.12 = $ 1,14,286

                   $ 1,00,000 * 1.00 = $ 1,00,000

                   $ 14,286 * 1.05      = $ 15,000

                  $ 2,300 * 1.12    =                $ 0

                                                    $ 1,15,000

**( $ 1,14,286 - $ 1,14,286 = $ 0 )

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