Mercury Company has only one inventory pool. On December 31, 2011, Mercury adopt
ID: 2345664 • Letter: M
Question
Mercury Company has only one inventory pool. On December 31, 2011, Mercury adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO method was $202,000. Inventory data are as follows:Year Ending Inventory at
Year-End Costs Ending Inventory at
Base Year Costs
2012 $ 240,840 $ 223,000
2013 314,160 264,000
2014 323,820 257,000
Required:
Compute the inventory at December 31, 2012, 2013, and 2014, using the dollar-value LIFO method. (Round intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.Omit the "$" sign in your response.)
Date Ending Inventory
12/31/12 $
12/31/13 $
12/31/14 $
Explanation / Answer
cost index:
base year
1
2012
1.08
(this is 240840/223000)
2013
1.19
(this is 314160/264000)
2014
1.26
(no layer is added this year, so you don't really need this)
date
inventory at base year cost
inventory layers
year of layer
inventory at added year cost
inventory (dollar value lifo)
2011
202000
202000
base year
202000
202000
2012
223000
202000
base year
202000
21000
2012
22,680
224,680
2013
264000
202000
base year
202000
21000
2012
22,680
41000
2013
48790
273470
2014
257000
202000
base year
202000
21000
2012
22,680
34000
2013
40460
265140
To convert “inventory layers” to “inventory at added year cost” multiply by the appropriate cost index – this is 1 for the base year layer, 1.08 for the layer added in 2012 and 1.19 for the layer added in 2013
In 2014, no layer is added. The inventory is less that year, so some of the 2013 layer was sold - last in first out.
Answer:
Date Ending Inventory
12/31/12 $ 224,680
12/31/13 $ 273,470
12/31/14 $ 265,140
cost index:
base year
1
2012
1.08
(this is 240840/223000)
2013
1.19
(this is 314160/264000)
2014
1.26
(no layer is added this year, so you don't really need this)