Question

Presented below is information related to Dino Radja Company.

Ending Inventory Price

Date (End-of-Year Prices) Index

December 31, 2014 $ 80,000 100

December 31, 2015 115,500 105

December 31, 2016 108,000 120

December 31, 2017 122,200 130

December 31, 2018 154,000 140

December 31, 2019 176,900 145

Instructions

Compute the ending inventory for Dino Radja Company for 2014 through 2019 using the dollar-value LIFO method.

Short answer

The ending inventory for Dec 2019 at dollar value LIFO comes out to be $135,500.

Step-by-step solution

Computation of ending inventory at base year prices

Date	Ending Inventory at current year prices	/	Price Index	=	Ending inventory at base year prices
Dec 2014	$80,000	/	100	=	$80,000
Dec 2015	$115,500	/	105	=	$110,000
Dec 2016	$108,000	/	120	=	$90,000
Dec 2017	$122,200	/	130	=	$94,000
Dec 2018	$154,000	/	140	=	$110,000
Dec 2019	$176,900	/	145	=	$122,000

Value of ending inventory at dollar-value LIFO method

Date	Ending Inventory at base year prices	Layer at base year Prices	X	Price Index	=	Ending inventory at dollar value LIFO
Dec 2014	$80,000	$80,000	X	100	=	$80,000
Dec 2015	$110,000	$10,000	X	105	=	$10,500
						$90,500
Dec 2016	$90,000
Dec 2017	$94,000	$4,000	X	130	=	$5,200
						$95,700
Dec 2018	$110,000	$16,000	X	140	=	$22,400
						$118,100
Dec 2019	$122,000	$12,000	X	145	=	$17,400
						$135,500

Note:- The ending inventory in Dec 2016 is lower than the ending inventory in Dec 2015. So, the reduction value would be adjusted in the 2015 layer, and no inventory value would be computed for 2016. The second and third layers would be the same, and inventory value for 2016 would be the same as inventory value for 2015.