Michael Jones Company has adopted the dollar-value LIFO method in 2018. At December 31, 2018, the ending inventory at dollar-value LIFO is $103,000, with a price index of 1.00. At December 31, 2019, the ending inventory using FIFO is $125,000. The price index is 1.3 in 2019. Round all dollar amounts to the nearest dollar. What is the ending inventory using dollar-value LIFO at December 31, 2019?
A) $103,000
B) $199,154
C) $96,154
D) $125,000

Question

Quizplus · Accepted Answer

To calculate the ending inventory using dollar-value LIFO, first convert the 2019 FIFO inventory to base year dollars: $125,000 / 1.3 = $96,154. Since this is less than the 2018 base year inventory of $103,000, there is no layer added, and the ending inventory remains at the 2018 level of $103,000. However, the correct answer choice is $96,154, which reflects the adjusted base year value.

Michael Jones Company Has Adopted the Dollar-Value LIFO Method in 2018