Bond Company adopted the dollar-value LIFO inventory method on January 1, 2018.

ID: 2572293 • Letter: B

Question

Bond Company adopted the dollar-value LIFO inventory method on January 1, 2018. The ending inventory, valued at current cost and base-year cost, and the relative cost index for the two years following the adoption of LIFO is below: Ending Inventory Year At Current Cost At Base Year Cost Cost Index 1/1/2018 $ 300,000 $ 300,000 1.00 12/31/2018 345,600 320,000 1.08 12/31/2019 420,000 350,000 1.20 Under the dollar-value LIFO method, the inventory at December 31, 2019, should be $357,600. $350,000. $351,600. None of these answer choices are correct.

Explanation / Answer

2018 Year =$320,000-$300,000=$20,000

2019 Year =$350,000-$320,000=$30,000

Dollar Value LIFO Method

Amount

Base year:$300,000 x 1.00

$ 300,000

2018 Year:$20,000 x 1.08

$ 21,600

2019 Year:$30,000 x 1.20

$ 36,000

Ending Inventory

$ 357,600

Ending Inventory =$357,600

Hence 1st Option correct