Question

Mercury company has only one inventory pool. on december 31, 2024, mercury adopted the dollar-value lifo inventory method. The inventory on that date using the dollar-value lifo method was $200,000. Inventory data are as follows: year ending inventory at year-end costs ending inventory at base year costs 2025 $ 231,000 $ 220,000 2026 299,000 260,000 2027 300,000 250,000 required: compute the inventory at december 31, 2025, 2026, and 2027, using the dollar-value lifo method. note: round "year end cost index" to 2 decimal places.

Answer 1

The dollar-value LIFO inventory for 2025, 2026, and 2027 calculated by adjusting the inventory at base year costs with their respective year-end cost indexes are $210,000, $230,000, and $240,000 respectively.

Step-by-step explanation:

The student asked how to compute inventory at the end of each year using the dollar-value LIFO method. To do this, we must calculate the year-end cost index for each year by dividing the ending inventory at year-end costs by the ending inventory at base year costs and then multiplying by 100.

The calculated indexes are used to adjust the inventory at base year costs to reflect price changes and calculate the dollar-value LIFO inventory for each subsequent year.

For 2025, the year-end cost index would be (\(\frac{231,000}{220,000}\)) \(\times 100 = 105.00\). Using this index, we adjust the 2024 LIFO inventory value of \$200,000 by this index to get the 2025 dollar-value LIFO inventory value: \(200,000 \times 1.05\) = \$210,000.

For 2026, the year-end cost index is (\(\frac{299,000}{260,000}\)) \(\times 100 = 115.00\). The dollar-value LIFO inventory is \(\$200,000 \times 1.15\) = \$230,000.

In 2027, the year-end cost index is (\(\frac{300,000}{250,000}\)) \(\times 100 = 120.00\). The dollar-value LIFO inventory is \(\$200,000 \times 1.20\) = \$240,000.