Question

Kingston Company uses the dollar-value LIFO method of computing inventory. An external price index is used to convert ending inventory to base year. The company began operations on January 1, 2018, with an inventory of $150,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:Year Ended Ending Inventory Cost IndexDecember 31 at Year-End Costs (Relative to Base Year)2018 $ 200,000 1.082019 245,700 1.172020 235,980 1.142021 228,800 1.10Required:
Calculate inventory amounts at the end of each year. (Round intermediate calculations and final answers to the nearest whole dollars.)

Answer 1

Answer:

2018    187,697.54

2091:   216,761.29

2020: 213,240.55

2021:   214,742.15

Explanation:

Conversion to base year price:

year        ending inv             index   base-year price

2017  $150,000.00   1.00   $150,000.00

2018  $200,000.00   1.08   $184,840.00

2019  $245,700.00   1.17   $209,638.00

2020  $235,980.00   1.14   $206,634.00

2021  $228,800.00   1.10   $208,000.00

TABLE FOR DL LIFO

                        2018           2019       2020    2021

base-price  $184,840.00  $209,638.00  $206,634.00  $208,000.00

layers  

2017       $150,000.00  $150,000.00   $150,000.00  $150,000.00

2018       $  34,840.00   $34,840.00   $ 34,840.00  $  34,840.00

2019                                      $24,798.00   $  21,794.00  $   21,794.00

2020    

2021                                                            $    1,366.00

Ending Inv      $187,697.54   $216,761.29   $213,240.55  $  214,743.15

Notice as it is LIFO in the case of decrease, we erode por the most recent year later