On January 1, 2021, the Haskins Company adopted the dollar-value LIFO method for its one inventory pool. The pool's value on this date was $720,000. The 2021 and 2022 ending inventory valued at year-end costs were $754,000 and $848,000, respectively. The appropriate cost indexes are 1.04 for 2021 and 1.06 for 2022. Calculate the inventory value at the end of 2021 and 2022 using the dollar value LIFO methods.

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Business

Chris Weiss

7 February, 18:46

On January 1, 2021, the Haskins Company adopted the dollar-value LIFO method for its one inventory pool. The pool's value on this date was $720,000. The 2021 and 2022 ending inventory valued at year-end costs were $754,000 and $848,000, respectively. The appropriate cost indexes are 1.04 for 2021 and 1.06 for 2022. Calculate the inventory value at the end of 2021 and 2022 using the dollar value LIFO methods.

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Audrey Fox · Answer 1

2021: 784,160‬ dollars

2022: 864,308 dsollars

Explanation:

At year-end we must adjust by the difference in the cost indexes

Assumuning the beginning of 2021 is 1.00 and ending of 2021 1.04 then, inventory should be:

2021 ending inventory:

754,000 * 1.04 = 784,160‬

Then, at 2022 we adjust for the quotient between 2021 and 2022 indexes:

848,00 x 1.06/1.04 = 864,307.6923 = 864,308