Question

Bonita Company had ending inventory at end-of-year prices of $98,000 at December 31, 2019; $117,502 at December 31, 2020; and $131,400 at December 31, 2021. The year-end price indexes were 100 at 12/31/19, 110 at 12/31/20, and 120 at 12/31/21. Compute the ending inventory for Bonita Company for 2019 through 2021 using the dollar-value LIFO method.

Answer 1

LIFO method

2019 = $98000 (Sam's as before)

2020

Inventory at 2020 without indexation = $117502/1.1

= $106820

Increase in inventory = $106820 - $98000 = $8820

Inventory according to LIFO

= Last year inventory + (addition indexed amount)

= $98000 + ($8820*1.1)

= $107702

2021

Inventory of 2021 2020 price

= $131400/1.2

= $109500

Change in inventory = $109500 - $106820

= $2680

Inventory at 2021 according to LIFO

= $98000 + ($8820*1.10) + ($2680*1.20)

= $110918