Question

Sheffield Corp. uses dollar-value LIFO method of computing its inventory cost. Data for the past three years is as follows: Year ended December 31 Inventory at End-of-year Prices Price Index 2019 $ 654000 1.00 2020 1261000 1.05 2021 1345250 1.10 What is the 2021 inventory balance using dollar-value LIFO

Answer 1

2021 inventory balance using dollar-value LIFO = $1,384,025

Step-by-step explanation:

Note: Before answering the question, the data in it are sorted first as follows:

Year ended December 31 Inventory at End-of-year Prices Price Index

2019 $ 654000 1.00

2020 1261000 1.05

2021 1345250 1.10

The explanation of the answer is now given as follows:

Change in inventory in 2020 = Inventory at End-of-year Prices in 2020 - Inventory at End-of-year Prices in 2019 = $1,261,000 - $654,000 = $607,000

Change in inventory in 2021 = Inventory at End-of-year Prices in 2021 - Inventory at End-of-year Prices in 2020 = $1,345,250 - $1,261,000 = $84,250

2021 inventory balance using dollar-value LIFO = (Inventory at End-of-year Prices in 2019 * Price Index in 2019) + (Change in inventory in 2020 * Price Index in 2020) + (Change in inventory in 2021 * Price Index in 2021) = ($654000 * 1.00) + ($607,000 * 1.05) + ($84,250 * 1.10) = $1,384,025