On January 1, 2024, the National Furniture Company adopted the dollar-value LIFO method of computing inventory. An internal cost index is used to convert ending inventory to base year. Inventory on January 1 was $220,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:
Year Ended December 31 Inventory at Year-End Costs Cost Index (Relative to Base Year)
2024 $ 302,400 $ 1.08
2025 364,000 1.12
2026 368,000 1.15
Required:
Compute inventory amounts at the end of each year using the dollar-value LIFO method.
To compute inventory amounts at the end of each year using the dollar-value LIFO method, we need to apply the cost indexes to the year-end inventory amounts. Here are the calculations:
2024:
Ending inventory at year-end costs: $302,400
Ending inventory at base-year costs: $302,400 / 1.08 = $280,000
2025:
Ending inventory at year-end costs: $364,000
Ending inventory at base-year costs: $364,000 / 1.12 = $325,000
2026:
Ending inventory at year-end costs: $368,000
Ending inventory at base-year costs: $368,000 / 1.15 = $320,000
Therefore, the inventory amounts at the end of each year using the dollar-value LIFO method are:
2024: $280,000
2025: $325,000
2026: $320,000