Question

the company had the following inventory at end-of-year prices: $1,230,000 in 2016 (base year), $1,345,000 in 2017, and $1,350,000 in 2018. the price index is 1.02 in 2017 and 1.03 in 2018. what is the lifo effect in 2018? round to the nearest whole number.

Answer 1

The LIFO effect in 2018 is $7,948.

Step-by-step explanation:

In order to calculate the LIFO effect in 2018, we need to determine the change in inventory values from 2017 to 2018.

Using the price index, we can calculate the adjusted inventory values as follows:

• 2016 inventory value: $1,230,000 (base year)
• 2017 inventory value: $1,345,000 / 1.02 = $1,318,627.45
• 2018 inventory value: $1,350,000 / 1.03 = $1,310,679.61

The LIFO effect is calculated by subtracting the adjusted 2018 inventory value from the adjusted 2017 inventory value. Therefore, the LIFO effect in 2018 is $1,318,627.45 - $1,310,679.61 = $7,947.84. Rounded to the nearest whole number, the LIFO effect in 2018 is $7,948.

Answer 2

The LIFO effect refers to the impact of changes in inventory costs on a company's financial statements when using the LIFO method. In 2018, the LIFO effect is approximately $116,505 after adjusting for inflation.

Step-by-step explanation:

The LIFO effect refers to the impact of changes in inventory costs on a company's financial statements, specifically when using the LIFO (Last-In, First-Out) method of inventory valuation. To calculate the LIFO effect in 2018, we need to determine the change in inventory value between 2016 and 2018, and then adjust for inflation.

First, let's calculate the change in inventory value: $1,350,000 (2018) - $1,230,000 (2016) = $120,000.

Next, we need to adjust for inflation using the price index. The formula for adjusting for inflation is: Change in value / Price index. In this case, the price index in 2018 is 1.03.

So, the LIFO effect in 2018 is: $120,000 / 1.03 = $116,504. After rounding to the nearest whole number, the LIFO effect in 2018 is approximately $116,505.