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19 September, 00:22

On January 1, Greenview Company adopted the dollar-value LIFO method. The inventory cost on January 1 was $112,000. On December 31, ending inventory had a cost of $136,400. The cost index for the year was 1.10. For what amount would ending inventory be reported?

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  1. 19 September, 01:19
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    125,200

    Explanation:

    Adjust inventory to base year prices:

    = Cost of ending inventory : cost index for the year

    = $136400 : 1.1

    = $124,000

    Current year LIFO layer:

    = Adjust inventory to base year prices - Cost of beginning inventory

    = $124,000 - $112,000

    = $12,000

    Inventory to be shown:

    = Add the new LIFO layer at end of period prices to prior year LIFO inventory

    = (112,000 * 1) + (12,000 * 1.1)

    = 112,000 + 13,200

    = 125,200
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