Question

Opera Corp. uses dollar-value LIFO method of computing its inventory cost. Data for the past three years is as follows: Year ended December 31. 2016 2017 2018 Inventory at Price End-of-year Prices $ 650,000 1.00 1,260,000 1.05 1,350,250 1.10 Index What is the 2018 inventory balance using dollar-value LIFO? a. $1,350,250. b. $1,285,000. c. $1,227,500. d. $1,257,750.

Answer 1

$1,257,750

Step-by-step explanation:

Dollar Value LIFO Method says goods are combined into pools and increase/decrease in a pool are measured in dollar value.

First of all we need to calculate Ending Inventory at the base year price as follows:

Date

Ending Inventory (end-of-year-prices)

Price Index

Ending Inventory at base year price

Change from prior year

31-Dec-16

$650,000

1.00

$650,000

$0

31-Dec-17

$1,260,000

1.05

$1,200,000

$550,000

31-Dec-18

$1,350,250

1.10

$1,227,500

$27,500

Dollar Value Ending Inventory LIFO Method

Dec 31, 2016

650,000

Dec 31, 2017

$650,000*1.00

$650,000

$550,000*1.05

$577,500

Total

$12,27,500

Dec 31, 2018

$650,000*1.00

$650,000

$550,000*1.05

$577,500

$27,500*1.10

$30,250

Total

$1,257,750