Exhibit 7-5
Sullivan Produce Co. switched from FIFO to LIFO on January 1, 2015, for external reporting and income tax purposes, while retaining FIFO for internal reports. On that date, the FIFO inventory equaled $360,000. The ensuing three-year period resulted in the following:

-Refer to Exhibit 7-5. The ending inventory at December 31, 2017, using the dollar-value LIFO method would be
A) $422,000
B) $402,000
C) $426,000
D) $420,400

Question

Exhibit 7-5
Sullivan Produce Co. switched from FIFO to LIFO on January 1, 2015, for external reporting and income tax purposes, while retaining FIFO for internal reports. On that date, the FIFO inventory equaled $360,000. The ensuing three-year period resulted in the following:

-Refer to Exhibit 7-5. The ending inventory at December 31, 2017, using the dollar-value LIFO method would be
A) $422,000 
B) $402,000 
C) $426,000 
D) $420,400

Quizplus · Accepted Answer

The ending inventory at December 31, 2017, using the dollar-value LIFO method would be $422,000. This is because the dollar-value LIFO method uses a price index to adjust the cost of inventory over time, and the price index has increased from 100 at the beginning of the year to 105 at the end of the year. This means that the cost of inventory has increased by 5%, and the ending inventory is therefore worth $422,000.

Exhibit 7-5 Sullivan Produce Co. Switched from FIFO to LIFO on January