Question

Presented below is information related to Kaisson Corporation for the last 3 years.

Quantities Base-Year Cost Current-Year Cost

in Ending

Item Inventories Unit Cost Amount Unit Cost Amount

December 31, 2016

A 9,000 \(2.00 \)18,000 \(2.20 \)19,800

B 6,000 3.00 18,000 3.55 21,300

C 4,000 5.00 20,000 5.40 21,600

Totals \(56,000 \)62,700

December 31, 2017

A 9,000 \(2.00 \)18,000 \(2.60 \)23,400

B 6,800 3.00 20,400 3.75 25,500

C 6,000 5.00 30,000 6.40 38,400

Totals \(68,400 \)87,300

December 31, 2018

A 8,000 \(2.00 \)16,000 \(2.70 \)21,600

B 8,000 3.00 24,000 4.00 32,000

C 6,000 5.00 30,000 6.20 37,200

Totals \(70,000 \)90,800

Instructions

Compute the ending inventories under the dollar-value LIFO method for 2016, 2017, and 2018. The base period is January 1, 2016,and the beginning inventory cost at that date was $45,000. Compute indexes to two decimal places.

Short answer

Dollar value LIFO for 2016, 2017, and 2018 are $57,320, $73,192, and$75,256 respectively. Price index are 112, 128, and 129 for given years, respectively.

Step-by-step solution

Price index schedule

	Inventories at Current Year cost	/	Inventories at Base year cost	=	Price Index
Dec 2016	$62,700	/	$56,000	=	1.12 or 112%
Dec 2017	$87,300	/	$68,400	=	1.28 or 128%
Dec 2018	$90,800	/	$70,000	=	1.29 or 129%

Inventories at dollar value LIFO

Date	Ending inventory at base year	Layer	X	Price Index	=	Dollar value LIFO
2015	$45,000	$45,000	X	100	=	$45,000
2016	$56,000	$11,000	X	112	=	$12,320
						$57,320
2017	$68,400	$12,400	X	128	=	$15,872
						$73,192
2018	$70,000	$1,600	X	129	=	$2,064
		$70,000				$75,256