Question

In a period when costs are falling and inventory quantities are stable, the lowest taxable 10)_ income would be reported by using the inventory method of A) Moving average C) Weighted average. B) FIFO. D) LIFO. 11)2 11) If a company uses LIFO, a LIFO liquidation causes a company's income taxes to increase: A) LIFO liquidations have no effect on a company's income taxes B) Whether inventory purchase costs are declining or rising. C) When inventory purchase costs are rising D) When inventory purchase costs are declining. e Ba 12) Ramen Inc. adopted dollar-value LIFO (DVL) as of January 1, 2018, when it had a cost 12) inventory of $600,000. Its inventory as of December 31, 2018, was $667,800 at year-end costs and the cost index was 1.06. What was DVL inventory on December 31, 20187 A) $636,000 B) $630,000 C) $631,800 D) None of these answer choices are correct

Answer 1

Answer:

C) $631,800

Explanation:

Ramen      

                  Inventory       Inventory                            Inventory  

Date     at cost               at Base cost              Layer at base cost  1.1.2016     600000  600000/1 = 600000              600000

31.12.2016   667800  667800/1.06 = 630000      600000  

                                                                                              30000

Inventory layers                              Ending

Converted to acquisition cost Inventory at DVL cost

600000                                                600000

600000

30000 x 1.06 = 31800                         631800

Therefore, The DVL inventory on December 31, 20187 was $631800.