Udon Inc.adopted dollar-value LIFO (DVL)as of January 1,2016,when it had an inventory of $700,000.Its inventory as of December 31,2016,was $777,000 at year-end costs and the cost index was 1.05.What was DVL inventory on December 31,2016?
A)$735,000.
B)$740,000.
C)$742,000.
D)$777,000.

Question

Quizplus · Accepted Answer

To calculate the DVL inventory, we need to inflate the base year inventory to current year costs using the cost index.

Inflation factor = (ending CPI/ base CPI) = 1.05/1.00 = 1.05

Base year inventory at current year costs = $700,000 × 1.05 = $735,000

Therefore, the DVL inventory on December 31, 2016, would be $742,000.

Udon Incadopted Dollar-Value LIFO (DVL)as of January 1,2016,when It Had an an Inventory