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Intermediate Accounting 2 Acct 342/542
Dollar-value LIFO
Problem 62 Computation of Dollar-Value LIFO Index. The Hicks Company adopted the dollarvalue LIFO method on January 1, 2014. At that time, its inventory consisted of 4,000 gidgets,
2,000 midgets, and 6,000 widgets. The following data are available concerning inventory
amounts for the next three years:
1/1/2014
12/31/2014
12/31/2015
12/31/2016
Gidgets
units
cost
4,000 $8
5,000
7
6,000
6
7,000
5
Midgets
units
cost
2,000 $11
3,000 12
5,000 13
6,000 15
Widgets
units
cost
6,000 $20
8,000 19
10,000 21
12,000 20
Required: Compute the current-to-base index for the base inventory later (1/1/2014), and
for each year end. [Please carry your answer to 4 decimal places.]
Problem 63 Computation of Dollar-Value LIFO Index. The Gunter Company uses a cost index
from an industry guide in its computation of an annual layer value for $-Value LIFO. The following
information about the external index is available:
External
Index
Date
Value
12/31/13
100
12/31/14
110
12/31/15
120
12/31/16
130
12/31/17
140
12/31/18
150
12/31/19
160
Required: Gunter adopts $-Value LIFO on January 1, 2014, with a base inventory as of
12/31/2013. What is the$-Value LIFO cost index value (computed from the
external index) for the base inventory? For each subsequent year?
© 2014 by W. David Albrecht. .
219
Problem 64 Dollar Value LIFO. On January 1, 2014, Davis distributors, Inc., adopted the dollarvalue LIFO inventory method for income tax and external financial statement reporting purposes.
However, Davis continued to use the FIFO inventory method for internal accounting and management
purposes. In applying the LIFO method, Davis uses internal conversion price indexes and the multiplepools approach, under which the substantially identical inventory items are grouped into LIFO
inventory pools. The following data were available for Inventory Pool #1, which consists of products A
and B, for the two years following the adoption of LIFO:
FIFO Basis Records:
Inventory, 1/1/14
Product A
Product B
Units
Unit
Cost
Total
Cost
12,000
8,000
$30
25
$360,000
200,000
$560,000
Inventory, 12/31/14
Product A
Product B
17,000
9,000
35
28
$595,000
252,000
$847,000
Inventory, 12/31/15
Product A
Product B
13,000
10,000
40
32
$520,000
320,000
$840,000
Required:
1.
Calculate the cost index for 2014 and for 2015. Round to 3 decimal places.
2.
Prepare a schedule to calculate the inventory amounts at December 31, 2014 and 2015,
using the dollar-value LIFO inventory method.
© 2014 by W. David Albrecht. .
220
Question 65 Dollar value LIFO On 1/1/14, Revard, Inc., adopted the $-value LIFO method for
computing the cost of its ending inventories. Its base year inventory at that time had a historical cost of
$80,000.
Ending
Inventory
Inventory
Yearly
Year
index
@current cost
Purchases
13
1.00
$80,000
14
1.20
120,000
628,000
15
1.50
170,000
729,360
16
1.80
190,000
682,572
17
1.70
153,000
962,835
18
1.90
275,000
725,989
19
2.10
250,000
645,772
Required:
1.
Calculate both the cost of ending inventory and the cost of sales for Revard for year
14 under $-value LIFO. [Please round only to the nearest dollar. You must show your
work.]
2.
Calculate both the cost of ending inventory and the cost of sales for Revard for year
15 under $-value LIFO. [Please round only to the nearest dollar. You must show your
work.]
3.
Calculate both the cost of ending inventory and the cost of sales for Revard for year
16 under $-value LIFO. [Please round only to the nearest dollar. You must show your
work.]
4.
Calculate both the cost of ending inventory and the cost of sales for Revard for year
17 under $-value LIFO. [Please round only to the nearest dollar. You must show your
work.]
5.
Calculate both the cost of ending inventory and the cost of sales for Revard for year
18 under $-value LIFO. [Please round only to the nearest dollar. You must show your
work.]
6.
Calculate both the cost of ending inventory and the cost of sales for Revard for year
19 under $-value LIFO. [Please round only to the nearest dollar. You must show your
work.]
© 2014 by W. David Albrecht. .
221
Question 66 Dollar-value LIFO Using the Dollar-value LIFO method, compute cost of goods sold
expense for the income statement and ending inventory for the balance sheet–for all six years.
Year
2013
2014
2015
2016
2017
2018
2019
Purchases
500,000
720,000
690,000
810,000
740,000
635,000
Index
1.30
1.35
1.21
1.45
1.75
1.84
1.95
EI @
FIFO (Current)
100,000
132,000
162,000
166,400
231,000
171,000
240,000
EI @
Base Cost
Required:
1.
Calculate both the cost of ending inventory and the cost of sales for year 14 under $value LIFO. [Please round only to the nearest dollar. You must show your work.]
2.
Calculate both the cost of ending inventory and the cost of sales for year 15 under $value LIFO. [Please round only to the nearest dollar. You must show your work.]
3.
Calculate both the cost of ending inventory and the cost of sales for year 16 under $value LIFO. [Please round only to the nearest dollar. You must show your work.]
4.
Calculate both the cost of ending inventory and the cost of sales for year 17 under $value LIFO. [Please round only to the nearest dollar. You must show your work.]
5.
Calculate both the cost of ending inventory and the cost of sales for year 18 under $value LIFO. [Please round only to the nearest dollar. You must show your work.]
6.
Calculate both the cost of ending inventory and the cost of sales for year 19 under $value LIFO. [Please round only to the nearest dollar. You must show your work.]
© 2014 by W. David Albrecht. .
222