Question

Midori Company had ending inventory at end-of-year prices of $100,000 at December 31, 2016; $119,900 at December 31, 2017; and $134,560 at December 31, 2018. The year-end price indexes were 100 at 12/31/16, 110 at 12/31/17, and 116 at 12/31/18. Compute the ending inventory for Midori Company for 2016 through 2018 using the dollar-value LIFO method.

Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow
Year Ended December 31 Inventory at Current-Year Cost Price Index
2016 $19,750 100
2017 22,140 108
2018 25,935 114

Compute the value of the 2017 and 2018 inventories using the dollar-value LIFO method

Answer 1

For Midori Company's inventory using the dollar-value LIFO method, the values for 2016, 2017, and 2018 are $100,000, $118,091, and $130,536.21, respectively. For Arna, Inc., the inventory values for 2017 and 2018 are $21,750 and $24,750.88.

Step-by-step explanation:

about dollar-value LIFO method:

The dollar-value LIFO method is an accounting approach used to value inventory that assumes the latest units purchased are the first ones used or sold. It adjusts inventory for changes in the price level, using a price index to account for inflation or deflation. According to provided data, Midori Company's ending inventory, calculated using the dollar-value LIFO method over a three-year period, is as follows: For 2016: $100,000.00 (Base year; no adjustment needed) For 2017: $100,000 + [($119,900 - $100,000) / 110 * 100] = $118,091 For 2018: $118,091 + [($134,560 - $119,900) / 116 * 100] = $130,536.21

Similarly, for Arna, Inc., using the dollar-value LIFO method to compute inventory for 2017 and 2018 yields: For 2017: $19,750 + [($22,140 - $19,750) / 108 * 100] = $21,750 For 2018: $21,750 + [($25,935 - $22,140) / 114 * 100] = $24,750.88