The Shill Company uses the dollar-value LIFO method for valuing inventory. The following inventory information is available at the end of the year:
$\begin{array}{lrl}\text { Year } & \text { Year-End Price } & \text { Price Index } \
\hline
1 & \$ 200,000 & 100 \
2 & 250,000 & 105 \
3 & 296,000 & 108 \
4 & 286,000 & 110
\end{array}$
-The inventory under dollar-value LIFO at the end of Year 3 is
A)$274,074.
B)$276,800.
C)$278,857.
D)$300,000.

Question

Quizplus · Accepted Answer

To calculate the inventory under dollar-value LIFO, adjust each year's ending inventory to base year prices, determine the layers, and then convert back to current year prices. Year 3's inventory is $296,000 / 1.08 = $274,074.07 in base year prices. The increase from Year 2 is $274,074.07 - $238,095.24 (Year 2's base price) = $35,978.83. Convert this layer back to Year 3 prices: $35,978.83 * 1.08 = $38,857.14. Add to Year 2's LIFO inventory: $240,000 + $38,857.14 = $278,857.14.

The Shill Company Uses the Dollar-Value LIFO Method for Valuing