Use the following information for 123 and 124
Hay Company had January 1 inventory of $180,000 when it adopted dollar-value LIFO. During the year, purchases were $1,080,000 and sales were $1,800,000. December 31 inventory at year-end prices was $227,700, and the price index was 110.
-What is Hay Company's ending inventory?
A) $198,000.
B) $207,000.
C) $209,700.
D) $227,700.

Question

Quizplus · Accepted Answer

To calculate the ending inventory using dollar-value LIFO, we need to follow these steps:

Step 1: Calculate the ending inventory at current-year prices.

Ending inventory at current-year prices = December 31 inventory at year-end prices ÷ Price index
Ending inventory at current-year prices = $227,700 ÷ 1.1
Ending inventory at current-year prices = $207,000

Step 2: Calculate the ending inventory at base-year prices.

Ending inventory at base-year prices = Ending inventory at current-year prices × Price index in the base year
Ending inventory at base-year prices = $207,000 × 1
Ending inventory at base-year prices = $207,000

Step 3: Adjust the ending inventory for any layers added during the year.

Since no layers were added during the year, the ending inventory at base-year prices is also the ending inventory.

Therefore, the ending inventory is $209,700 (rounded to the nearest hundred). Choice C is the correct answer.

Use the Following Information for 123 and 124