In 2016,Richard's Department Store changes its inventory method from FIFO to LIFO.Richard's uses the simplified LIFO method.Richard's year-end inventory under FIFO is as follows: 2015 - $300,000;2016 - $350,000.The 2015 price index is 110% and the 2016 index is 120%.The 2016 ending inventory after adopting the LIFO method is
A)$350,000.
B)$320,833.
C)$381,818.
D)$322,727.

Question

Quizplus · Accepted Answer

The LIFO inventory is calculated by dividing the ending inventory under FIFO by the current year's price index: $350,000 / 1.20 = $291,667. Then, adjust for the base year index: $291,667 * 1.10 = $322,727.

In 2016,Richard's Department Store Changes Its Inventory Method from FIFO