On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $260,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Year Ended Inventory Cost Index December 31 Year-End Costs (Relative to Base Year) 2021 $ 340,000 1.02 2022 350,000 1.06 2023 400,000 1.07 2024 430,000 1.10 Required: Calculate inventory amounts at the end of each year. (Round intermediate calculations and final answers to the nearest whole dollars.)
To calculate the inventory amounts at the end of each year, we need to use the dollar-value LIFO inventory method and the given cost indexes.
First, we'll calculate the inventory amount at the end of 2021:
2021 inventory = base year inventory + (year-end costs - base year costs) / cost index
2021 inventory = $260,000 + ($340,000 - $260,000) / 1.02
2021 inventory = $260,000 + $78,431.37
2021 inventory = $338,431
Next, we'll calculate the inventory amount at the end of 2022:
2022 inventory = base year inventory + (year-end costs - base year costs) / cost index
2022 inventory = $260,000 + ($350,000 - $260,000) / 1.06
2022 inventory = $260,000 + $84,905.66
2022 inventory = $344,906
Then, we'll calculate the inventory amount at the end of 2023:
2023 inventory = base year inventory + (year-end costs - base year costs) / cost index
2023 inventory = $260,000 + ($400,000 - $260,000) / 1.07
2023 inventory = $260,000 + $140,186.92
2023 inventory = $400,187
Finally, we'll calculate the inventory amount at the end of 2024:
2024 inventory = base year inventory + (year-end costs - base year costs) / cost index
2024 inventory = $260,000 + ($430,000 - $260,000) / 1.10
2024 inventory = $260,000 + $163,636.36
2024 inventory = $423,636
Therefore, the inventory amounts at the end of each year are as follows:
2021: $338,431
2022: $344,906
2023: $400,187
2024: $423,636
To calculate inventory amounts at the end of each year using the dollar-value LIFO inventory method, we need to apply the cost indexes to the ending inventory values. Here are the calculations:
Year 2021:
Ending inventory = Year-end cost / Cost index
= $340,000 / 1.02
≈ $333,333
Year 2022:
Ending inventory = Year-end cost / Cost index
= $350,000 / 1.06
≈ $330,189
Year 2023:
Ending inventory = Year-end cost / Cost index
= $400,000 / 1.07
≈ $373,832
Year 2024:
Ending inventory = Year-end cost / Cost index
= $430,000 / 1.10
≈ $390,909
Therefore, the inventory amounts at the end of each year are approximately:
2021: $333,333
2022: $330,189
2023: $373,832
2024: $390,909
To calculate the inventory amounts at the end of each year using the dollar-value LIFO inventory method, you need to follow these steps:
Step 1: Determine the base year inventory value.
The base year is the year that will serve as the reference point for the inventory values. In this case, the base year is 2021, and the inventory value on January 1, 2021, was $260,000.
Step 2: Calculate the ending inventory value for each year based on the cost index.
Multiply the year-end inventory value by the cost index relative to the base year to calculate the ending inventory value for each year.
Year 2021:
Ending Inventory Value = Year-End Costs (Relative to Base Year) * Base Year Inventory Value
= 1.02 * $260,000
= $265,200 (rounded to the nearest whole dollar)
Year 2022:
Ending Inventory Value = Year-End Costs (Relative to Base Year) * Base Year Inventory Value
= 1.06 * $260,000
= $275,600 (rounded to the nearest whole dollar)
Year 2023:
Ending Inventory Value = Year-End Costs (Relative to Base Year) * Base Year Inventory Value
= 1.07 * $260,000
= $278,200 (rounded to the nearest whole dollar)
Year 2024:
Ending Inventory Value = Year-End Costs (Relative to Base Year) * Base Year Inventory Value
= 1.10 * $260,000
= $286,000 (rounded to the nearest whole dollar)
Therefore, the inventory amounts at the end of each year are as follows:
- Year 2021: $265,200
- Year 2022: $275,600
- Year 2023: $278,200
- Year 2024: $286,000