Question

on december 31, 2024, a company adopted the dollar-value lifo inventory method. inventory at the end of 2024 for its only inventory pool was $400,000 under the dollar-value lifo method. at the end of 2025, inventory at year-end cost is $473,000 and the cost index is 1.10. at the end of 2026, inventory at year-end cost is $492,000 and the cost index is 1.20. inventory at the end of 2026 at dollar-value lifo cost is:

Answer 1

Final answer:

The ending inventory for 2026 using the dollar-value LIFO method is $527,833 after adjusting for inflation using the cost indexes for 2025 and 2026.

Step-by-step explanation:

To calculate inventory at the end of 2026 using the dollar-value LIFO cost method, we must adjust the year-end inventory costs to account for inflation using the provided cost indexes. First, the ending inventory of 2025 is adjusted for inflation to get the LIFO layer inventory for 2025: $473,000 / 1.10 = $430,000. This amount is subtracted from the 2024 base to get the LIFO increment: $430,000 - $400,000 = $30,000. For 2026, we inflate the 2025 ending inventory by the 2026 cost index: $473,000 / 1.20 = $394,167. The LIFO layer for 2026 is the end inventory of 2026 minus this deflated inventory: $492,000 - $394,167 = $97,833. To get the ending 2026 dollar-value LIFO inventory, we add the LIFO increments to the 2024 base: $400,000 + $30,000 (2025 layer) + $97,833 (2026 layer) = $527,833.