Question
Connie Chung Corporation adopted the dollar-value LIFO retail inventory method on January 1, 2016. At that time the inventory had a cost of $54,000 and a retail price of $100,000. The following information is available.
Year-End
Inventory at Retail
Current Year
Cost—Retail %
Year End
Price Index
The price index at January 1, 2016, is 100.
Compute the ending inventory at December 31 of the years 2016–2019. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answers to 0 decimal places, e.g. 28,987.)
2016
2017
2018
2019
Year-End
Inventory at Retail
Current Year
Cost—Retail %
Year End
Price Index
2016 $118,720 57% 106 2017 138,750 60% 111 2018 125,350 61% 115 2019 162,500 58% 125
Explanation / Answer
2016 Restate the base year inventory to retail ($118,720 /1.06) 112000 Layers 1 : $100,000*1.00*(54000/100,000) 54000 Layers 2 : $12000*1.06*57% 7250.4 Ending inventory for 2016 61250.4 2017 Restate the base year inventory to retail ($138750 /1.11) 125000 Layers 1 : $100,000*1.00*(54000/100,000) 54000 Layers 2 : $12000*1.06*57% 7250.4 Layers 3 : $13000*1.11*60% 8658 Ending inventory for 2017 69908.4 2018 Restate the base year inventory to retail ($125,350 /1.15) 109000 Layers 1 : $100,000*1.00*(54000/100,000) 54000 Layers 2 : $9000*1.06*57% 5437.8 Ending inventory for 2018 59437.8 2019 Restate the base year inventory to retail ($162,500 /1.25) 130000 Layers 1 : $100,000*1.00*(54000/100,000) 54000 Layers 2 : $9000*1.06*57% 5437.8 Layers 3 : $21000*1.25*58% 15225 Ending inventory for 2019 74662.8
2016 2017 2018 2019 Ending inventory 61250.4 69908.4 59437.8 74662.8