Problem 18-68 (LO. 6) Amber Company has used the dollar-value LIFO technique for

Question

Problem 18-68 (LO. 6) Amber Company has used the dollar-value LIFO technique for the past three years. The company has only one inventory pool. Its beginning inventory for the current year was computed as follows: Base Period LIFO Index LIFO Layer Cost Base period inventory $1,200,000 1.00 $1,200,000 1.04 312,000 400,000 1.06 424,000 $1,936,000 Year one300,000 layer Year two layer $1,900,000 If required, round your answers to the nearest dollar a. Assume that the current-year ending inventory at current prices is $2,124,000, and the LIFO index is 1.06. The company's LIFO inventory as of the end of the current year is Feedback Check My Work Under dollar-value LIFO, each inventory item is assigned to a pool. A pool is a collection of similar items and is treated as a separate inventory. Determining whether items are similar involves considerable judgment. b. Assume that the current-year ending inventory at current prices is $1,8so,000, and the LIFO index is 1.06. The company's LIFO inventory as of the end of the current year is Feedback Check My Work Incorrect Feedback Check My Work Incorrect

Explanation / Answer

Answer a. Current Year Inventory at Current Prices = $2,124,000 Current Year Inventory at Base Year Prices = $2,124,000 / 1.06 Current Year Inventory at Base Year Prices = $2,003,774 (Approx.) Now, calculating the Ending Inventory using Dollar Value LIFO Technique Ending Inventory at Base Year Costs Inventory Layers at Base Year Cost Inventory Layers Converted to Cost Ending Inventory DVL Cost                     2,003,774    1,200,000 (Base) 1,200,000 X 1.00 =    1,200,000       300,000 (Year 1) 300,000 X 1.04 =        312,000       400,000 (Year 2) 400,000 X 1.06 =        424,000       103,774 (Year 3) 103,774 X 1.06 =        110,000                           2,046,000 Answer b. Current Year Inventory at Current Prices = $1,850,000 Current Year Inventory at Base Year Prices = $1,850,000 / 1.06 Current Year Inventory at Base Year Prices = $1,745,283 (Approx.) Now, calculating the Ending Inventory using Dollar Value LIFO Technique Ending Inventory at Base Year Costs Inventory Layers at Base Year Cost Inventory Layers Converted to Cost Ending Inventory DVL Cost                     1,745,283    1,200,000 (Base) 1,200,000 X 1.00 =    1,200,000       300,000 (Year 1) 300,000 X 1.04 =        312,000       245,283 (Year 2) 245,283 X 1.06 =        260,000                           1,772,000

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