Question

Western Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and the cost index was 1.08. What was DVL inventory on December 31, 2016?

Answer 1

758,200

Step-by-step explanation:

815,400 / 1.08 = 755,000

755,000 - 715,000 = 40,000

40,000 * 1.08 = 43,200

715,000 + 43,200 = 758,200

Answer 2

$757,800

Explanation:

For the computation of DVL inventory on December 31, 2016 first we need to follow some steps which is shown below:-

Adjusted closing value for inflation = Inventory as on Dec 31, 2016 ÷ Cost index

= $815,000 ÷ 1.08

= $754,630

Increase during the year in real terms = $754,630 - $715,000

= $39,630

Real dollar value of increase in inventory = $39,630 × 1.08

= $42,800

So,

DVL inventory = Jan 1 Inventory + Real dollar value of increase in inventory

= $715,000 + $42,800

= $757,800