Problem 8-11 Novak Company cans a variety of vegetable-type soups. Recently, the
ID: 340694 • Letter: P
Question
Problem 8-11 Novak Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works He has provided you with the following information about purchases made over a 6-year period Ending Inventory (End-of-Year Prices) Date Dec. 31, 2013 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018 $72,700 123,804 120,127 143,278 164,169 191,496 Price Index 100 114 131 142 153 158 You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value Compute the ending inventory for Richardson Company for 2013 through 2018 using dollar-value LIFO Ending Inventory 2013 2014 2015Explanation / Answer
Year
Inventory at year end price
Price index
Inventory at base year price
Change from prior year
2013
$72700
100
$72700
$0
2014
$123804
114
$108600
$35900
2015
$120127
131
$91700
($16900)
2016
$143278
142
$100900
$9200
2017
$164169
153
$107300
$6400
2018
$191496
158
$121200
$13900
Now let’s calculate dollar value inventory;
Year
Calculation
Dollar value inventory
2013
$72700 * 1
$72700
2014
($72700 * 1) + ($35900 * 1.14)
$113626
2015
($72700 * 1) + ($19000 * 1.14)
$94360
2016
($72700 * 1) + ($19000 * 1.14) + ($9200 * 1.42)
$107424
2017
($72700 * 1) + ($19000 * 1.14) + ($9200 * 1.42) + ($6400 * 1.53)
$117216
2018
($72700 * 1) + ($19000 * 1.14) + ($9200 * 1.42) + ($6400 * 1.53) + ($13900 * 1.58)
$139178
Year
Inventory at year end price
Price index
Inventory at base year price
Change from prior year
2013
$72700
100
$72700
$0
2014
$123804
114
$108600
$35900
2015
$120127
131
$91700
($16900)
2016
$143278
142
$100900
$9200
2017
$164169
153
$107300
$6400
2018
$191496
158
$121200
$13900