Question

Cullumber Company has a beginning inventory in year one of $1,355,000 and an ending inventory of $1,650,000. The price level has increased from 100 at the beginning of the year to 110 at the end of year one. Calculate the ending inventory under the dollar-value LIFO method.

Answer 1

Cullumber Company

Ending Inventory under the dollar-value LIFO method:

$1,500,000

Step-by-step explanation:

a) Data and Calculations:

Beginning Inventory = $1,355,000

Ending Inventory = $1,650,000

Beginning Inventory at the year-end price = $1,355,000/100 * 110 = $1,490,500

Ending inventory at the base price = $1,650,000/110 * 100 = $1,500,000

b) The ending inventory value should be $1,500,000. This will reflect the base price without the increase in the price level from 100 to 110. It will also make the beginning and ending inventories to be comparable.