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Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2009.Its inventory at that date was $220,000 and the relevant price index was 100.Information regarding inventory for subsequent years is as follows:
-What is the cost of the ending inventory at December 31, 2011 under dollar-value LIFO?

Question

Use the following information for questions.
Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2009.Its inventory at that date was $220,000 and the relevant price index was 100.Information regarding inventory for subsequent years is as follows: 
-What is the cost of the ending inventory at December 31, 2011 under dollar-value LIFO?

Quizplus · Accepted Answer

To calculate the ending inventory under dollar-value LIFO we need to follow the steps below:
1. Determine the price index for the current year: The price index for 2011 is 116 (given).
2. Determine the inventory at base year prices: Divide the ending inventory at current year prices by the price index. 
Ending inventory at current prices = $246,400 (given).
Inventory at base year prices = $246,400/116 = $2,120.
3. Determine the LIFO layer for the current year: The LIFO layer for 2011 is $2,120 - $2,010 = $110.
4. Determine the ending inventory at base year prices: Add the LIFO layer to the base year value of inventory at beginning of the year.
Ending inventory at base year prices = $2,120 + $230,000 = $232,120.
Therefore, the cost of the ending inventory at December 31, 2011 under dollar-value LIFO is $232,840 (rounded to the nearest $10). Hence the correct option is C.

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