Crabby Appleton Inc adopted dollar value LIFO on January 1 2

Crabby Appleton, Inc. adopted dollar value LIFO on January 1, 2013, when the inventory value was $1,200,000.00. The December 31, 2011 ening inventory at year end costs was $1,430,000.00 and the cost index for the year was 1.05.

Compute the dolalr value LIFO inventory valuation for the December 31, 2013 inventory.

Show all work please

Solution

Inventory valuation

Method: LIFO

Crabby Appleton, Inc.

2011 Dec 31 Ending inventory -- 14,30,000

As per LIFO method last comes first goes out and hence inventory at the year end i.e. 2012 Dec 31 would be from the ending inventory of 2011 Dec 31.

As cost of living index is 1.05

Closing inventory is revalued as 12,00,000 *1.05

= 12,60,000

Note: Since LIFO is adopted the closing inventory of 12,00,000 being less than 14,30,000 is assumed to be wholly from that 14,30,000. Hence valued at 1.05 for 1 dollar.