Udon Inc. adopted dollar-value LIFO (DVL) as of January 1, 2013, when it had an inventory of $700,000. Its inventory as of December 31, 2013, was $777,000 at year-end costs and the cost index was 1.05. What was DVL inventory on December 31, 2013?
A)$735,000.
B)$740,000.
C)$742,000.
D)$777,000.

Question

Quizplus · Accepted Answer

To calculate the DVL inventory, we need to first find the value of the inventory at base-year costs as of December 31, 2013, which is:
$777,000 / 1.05 = $740,000 (rounded to the nearest thousand)
Then, to calculate the DVL inventory, we need to calculate the LIFO layer added in 2013:
$740,000 - $700,000 = $40,000
Therefore, the DVL inventory on December 31, 2013, is:
$700,000 + $40,000 = $740,000 (rounded to the nearest thousand) 
Thus, the correct answer is option C.

Udon Inc Adopted Dollar-Value LIFO (DVL) as of January 1, 2013