Question

On January 1, 2024, a Company adopted the dollar-value LIFO method for its one inventory pool. The pool’s value on this date was $660,000. The 2024 and 2025 ending inventory valued at year-end costs were $690,000 and $760,000, respectively. The appropriate cost indexes are 1.04 for 2024 and 1.08 for 2025.

Required:
Complete the below table to calculate the inventory value at the end of 2024 and 2025 using the dollar-value LIFO method.

Answer 1

Using the dollar-value LIFO method, the inventory value at the end of 2024 is $31,200 and the inventory value at the end of 2025 is $108,000.

To calculate the inventory value at the end of 2024 and 2025 using the dollar-value LIFO method, we need to follow these steps:

1. Determine the base-year value of the inventory pool:
- The base-year value is the value of the inventory pool on the date the LIFO method was adopted.
- In this case, the base-year value is $660,000, as given in the question.

2. Calculate the inventory value at the end of 2024:
- To calculate the inventory value at the end of 2024, we need to determine the change in the inventory pool value from the base year to 2024.
- The change in the inventory pool value is the difference between the 2024 ending inventory value and the base-year value.
- The 2024 ending inventory value is $690,000, as given in the question.
- Therefore, the change in the inventory pool value from the base year to 2024 is $690,000 - $660,000 = $30,000.
- Since the cost index for 2024 is 1.04, we multiply the change in value by the cost index to get the inventory value at the end of 2024.
- The inventory value at the end of 2024 is $30,000 * 1.04 = $31,200.

3. Calculate the inventory value at the end of 2025:
- Similar to the previous step, we need to determine the change in the inventory pool value from the base year to 2025.
- The change in the inventory pool value is the difference between the 2025 ending inventory value and the base-year value.
- The 2025 ending inventory value is $760,000, as given in the question.
- Therefore, the change in the inventory pool value from the base year to 2025 is $760,000 - $660,000 = $100,000.
- Since the cost index for 2025 is 1.08, we multiply the change in value by the cost index to get the inventory value at the end of 2025.
- The inventory value at the end of 2025 is $100,000 * 1.08 = $108,000.

Answer 2

Inventory value at the end of 2025 = $712,938.46 x 1.08 + $760,000 - $760,000 / 1.08 = $826,269.83

Here is the completed table to calculate the inventory value at the end of 2024 and 2025 using the dollar-value LIFO method:

Year Inventory Value

2024 $712,938.46

2025 $826,269.83

To calculate the inventory value at the end of 2024, use the following formula:

Inventory value at the end of 2024 = Base-year inventory x Cost index for 2024 + Ending inventory at year-end cost for 2024 - Ending inventory at year-end cost for 2024 / Cost index for 2024

Inventory value at the end of 2024 = $660,000 x 1.04 + $690,000 - $690,000 / 1.04 = $712,938.46

To calculate the inventory value at the end of 2025, use the following formula:

Inventory value at the end of 2025 = Inventory value at the end of 2024 * Cost index for 2025 + Ending inventory at year-end cost for 2025 - Ending inventory at year-end cost for 2025 / Cost index for 2025

Inventory value at the end of 2025 = $712,938.46 x 1.08 + $760,000 - $760,000 / 1.08 = $826,269.83