On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below:
- In determining the inventory balance should Badger report in its 12/31/2019 balance sheet:
A) An additional layer of $23,000 is added to the 1/1/2019 balance.
B) An additional layer of $22,000 is added to the 1/1/2019 balance.
C) An additional layer of $11,000 is added to the 1/1/2019 balance.
D) None of these answer choices are correct.

Question

On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below: 
- In determining the inventory balance should Badger report in its 12/31/2019 balance sheet:
A) An additional layer of $23,000 is added to the 1/1/2019 balance. 
B) An additional layer of $22,000 is added to the 1/1/2019 balance. 
C) An additional layer of $11,000 is added to the 1/1/2019 balance. 
D) None of these answer choices are correct.

Quizplus · Accepted Answer

$143,000 ÷ 1.10 = $130,000. This includes the previous two layers, the first at $100,000 and the second at $20,000, plus another at $10,000. The third is then brought forward to 12/31/2019 by $10,000 × 1.10 = $11,000.