Question

(1 pt.) Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow. Year ended Dec. 31 Inventory at current year cost Price index 2012 $19,750 100 2013 22,140 108 2014 25,935 114 Instructions: Compute the value of the 2013 and 2014 inventories using dollar-value LIFO. g

Answer 1

A.2013 $20,560

B.2014 $23,125

Step-by-step explanation:

2013 inventory at base amount ($22,140 ÷ 1.08)$20,500

2012 inventory at base amount(19,750)

Increase in base inventory $750

2013 inventory under LIFO

Layer one ($19,750 × 1.00)$19,750

Layer two ($750 × 1.08)810

Total $20,560

2014 inventory at base amount ($25,935 ÷ 1.14)$22,750

2013 inventory at base amount(20,500)

Increase in base inventory $2,250

2013 inventory under LIFO

Layer one ($19,750 × 1.00)$19,750

Layer two ($750 × 1.08)810

Layer three ($2,250 × 1.14)2,565

Total $23,125