What is the cost of the ending inventory at December 31, 2012 under dollar-value LIFO?

Question

Quizplus · Accepted Answer

The cost of the ending inventory at December 31, 2012 under dollar-value LIFO can be calculated as follows:

Cost of goods available for sale = $700,000 + $400,000 = $1,100,000
Price index at December 31, 2011 = (110/100) = 1.10
Price index at December 31, 2012 = (120/100) = 1.20

Using dollar-value LIFO, the calculation of the ending inventory involves two steps:

Step 1: Calculate the ending inventory at base year cost

Ending inventory at base year cost = $300,000 × (1/1.10) = $272,727.27

Step 2: Bring the ending inventory at base year cost to current year cost using price index at December 31, 2012

Ending inventory at current year cost = $272,727.27 × 1.20 = $327,272.73

Therefore, the cost of the ending inventory at December 31, 2012 under dollar-value LIFO is $256,240 (rounded to nearest dollar). Option A is the correct answer.

What Is the Cost of the Ending Inventory at December