Question

Midori Company had ending inventory at end-of-year prices of \(100,000 at December 31, 2016; \)119,900 at December 31, 2017; and $134,560 at December 31, 2018. The year-end price indexes were 100 at 12/31/16, 110 at 12/31/17,and 116 at 12/31/18. Compute the ending inventory for Midori Company for 2016 through 2018 using the dollar-valueLIFO method.

Short answer

Using the dollar-value LIFO, the value of ending inventory at the end of 2016, 2017, and 2018 amounts to $100,000, $109,900, and $118,020, respectively.

Step-by-step solution

Value of ending inventory for 2016 using dollar-value LIFO

As 2016 is the first year for converting dollar value LIFO and the index is also 100, the value of ending inventory would be the same as given.

The computation would be as follow –

$$\begin{gathered} \mathbf{Ending}\mathbf{}\mathbf{inventory}\mathbf{}\mathbf{at}\mathbf{}\mathbf{base}\mathbf{}\mathbf{yaer}\mathbf{}\mathbf{prices}\mathbf{}\mathbf{=}\mathbf{}\frac{\mathbf{Inventory}\mathbf{}\mathbf{at}\mathbf{}\mathbf{current}\mathbf{}\mathbf{cost}}{\mathbf{Price}\mathbf{}\mathbf{Index}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{100}\mathbf{,}\mathbf{000}}{\mathbf{1}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{100}\mathbf{,}\mathbf{000} \end{gathered}$$

A layer is a difference between the ending base year price and the opening base year price.

Ending Inventory at base year prices	Layer at base year prices	X	Price Index	=	Ending Inventory at LIFO Cost
$100,000	$100,000	X	100	=	$100,000

Value of ending inventory at the end of 2016 using dollar-value LIFO amounts to $100,000.

Value of ending inventory for 2017 using dollar-value LIFO

$$\begin{gathered} \mathbf{Ending}\mathbf{}\mathbf{inventory}\mathbf{}\mathbf{at}\mathbf{}\mathbf{base}\mathbf{}\mathbf{yaer}\mathbf{}\mathbf{prices}\mathbf{}\mathbf{=}\mathbf{}\frac{\mathbf{Inventory}\mathbf{}\mathbf{at}\mathbf{}\mathbf{current}\mathbf{}\mathbf{cost}}{\mathbf{Price}\mathbf{}\mathbf{Index}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{119}\mathbf{,}\mathbf{900}}{\mathbf{1}\mathbf{.}\mathbf{1}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{109}\mathbf{,}\mathbf{000} \end{gathered}$$

Ending Inventory at base year prices	Layer at base year prices	X	Price Index	=	Ending Inventory at LIFO Cost
	2016, $100,000	X	100	=	$100,000
$109,000	2017, + $9,000	X	110	=	+ $9,900
	$109,000				$109,900

Value of ending inventory at the end of 2016 using dollar-value LIFO amounts to $109,900.

Value of ending inventory for 2018 using dollar-value LIFO

$$\begin{gathered} \mathbf{Ending}\mathbf{}\mathbf{inventory}\mathbf{}\mathbf{at}\mathbf{}\mathbf{base}\mathbf{}\mathbf{yaer}\mathbf{}\mathbf{prices}\mathbf{}\mathbf{=}\mathbf{}\frac{\mathbf{Inventory}\mathbf{}\mathbf{at}\mathbf{}\mathbf{current}\mathbf{}\mathbf{cost}}{\mathbf{Price}\mathbf{}\mathbf{Index}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{134}\mathbf{,}\mathbf{560}}{\mathbf{1}\mathbf{.}\mathbf{16}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{116}\mathbf{,}\mathbf{000} \end{gathered}$$

Ending Inventory at base year prices	Layer at base year prices	X	Price Index	=	Ending Inventory at LIFO Cost
	2016, $100,000	X	100	=	$100,000
$116,000	2017, + $9,000	X	110	=	+ $9,900
	2018, + $7,000	X	116	=	+ $8,120
	$116,000				$118,020

Value of ending inventory at the end of 2016 using dollar-value LIFO amounts to $118,020.