Question

a company uses the dollar-value lifo inventory method. at the end of 20x2 the cost index is 1.25 and the ending inventory at base year cost is $360,000. if 20x2 beginning inventory at base year cost was $300,000, 20x2 ending inventory at dollar-value lifo cost is:

Answer 1

To calculate the ending inventory at dollar-value LIFO cost for 20x2, we take the increase in base year cost inventory from the beginning to the ending of the year, inflate it by the cost index, and add it to the beginning inventory to get a total of $375,000.

Step-by-step explanation:

The question refers to calculating the ending inventory cost using the dollar-value LIFO inventory method. Given the cost index (1.25) for 20x2 and the inventory at base year cost ($360,000), we can determine the ending inventory at LIFO cost by adjusting the base year cost for inflation. The beginning inventory at base year cost was $300,000, so the increase in base year cost inventory is $360,000 - $300,000 = $60,000.

To determine the dollar-value LIFO cost of the ending inventory, we inflate the increase in base year cost by the cost index. Thus, the increase in LIFO inventory cost is $60,000 × 1.25 = $75,000. The ending inventory at dollar-value LIFO cost for 20x2 would therefore be the original base year cost plus the inflated cost increase: $300,000 + $75,000 = $375,000.