Question

Crane Company began using dollar-value LIFO for costing its inventory last year. The base year layer consists of $596000. Assuming the current inventory at end of year prices equals $825000 and the index for the current year is 1.1, what is the ending inventory using dollar-value LIFO

Answer 1

$765,400

Step-by-step explanation:

This can be calculated step by step below:

Ending inventory at base-year-prices = current inventory at end of year prices / Current index = $825,000 / 1.1 = $750,000

Real-dollar quantity increase in inventory = Ending inventory at base-year-prices - Beginning inventory or base year layer = $750,000 - $596,000 = $154,000

Value of real-dollar quantity increase in inventory = Real-dollar quantity increase in inventory * Current index = $154,000 * 1.1 = $169,00

Dollar-value LIFO Ending inventory = Beginning inventory + Value of real-dollar quantity increase in inventory = $596,000 + $169,00 = $765,400.

Therefore, the ending inventory using dollar-value LIFO is $765,400.