CHAPTER 8 Inventories: Measurement 459 On January 1, 2018, Avondale Lumber adopt
ID: 2569945 • Letter: C
Question
CHAPTER 8 Inventories: Measurement 459 On January 1, 2018, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $260,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Year Ended December 31 2018 2019 2020 2021 Cost Index (Relative to Base Year) 1.02 1.06 1.07 1.10 Inventory Year- End Costs $340,000 350,000 400,000 430,000 Required: Caleculate inventory amounts at the end of each year.Explanation / Answer
Step 1 Calculation of Inventory at base year prises and changes in inventory from prior year Year ended December 31 Inventory at year end costs Price Index Inventory at base year prises Change from prior year A B C B/C D 2017 $260,000 1 $260,000 $0 2018 $340,000 1.02 $333,333 $73,333 2019 $350,000 1.06 $330,189 -$3,145 2020 $400,000 1.07 $373,832 $43,643 2021 $430,000 1.10 $390,909 $17,077 Step 2 Computation of inventory amounts at the end of each year December 31,2018 $260000 @ 1 $260,000 $73333 @ 1.02 $74,800 $334,800 December 31,2019 $260000 @ 1 $260,000 $70189 @ 1.02 $71,592 $331,592 December 31,2020 $260000 @ 1 $260,000 $70189 @ 1.02 $71,592 $43643 @ 1.07 $46,698 $378,291 December 31,2021 $260000 @ 1 $260,000 $70189 @ 1.02 $71,592 $43643 @ 1.07 $46,698 $17077 @ 1.10 $18,785 $397,076