student
Dollar-Value LIFO Review Problem
XYZ Company began operations on January 1, 2010, and uses the dollar-value LIFO method for externally reporting inventory. XYZ Company uses an external price index in its calculations. On January 1, 2010, XYZ Company had an inventory of $50,000. The following information has been extracted from inventory records:
Year Ended
December 31
Ending Inventory at Year-End Costs
Cost Index
(Relative to Base Year)
2010
$56,160
1.04
2011
$62,700
1.10
2012
$58,800
1.20
2013
$76,230
1.21
Required:
Compute XYZ’s ending inventory for each of the years ended December 31, 2010, 2011, 2012 and 2013.
Dollar Value LIFO
Date of dollar-value calculation
Inventory stated in current year costs
Price
Index
Inventory stated in base-year costs
Increase (decrease)
Adjusted
Layers
Reported Ending
Inventory on B/S
1/1/10
$50,000
1.00
$50,000
$50,000
$50,000*1.0 = $50,000
$50,000
12/31/10
56,160
1.04
54,000
4,000
Base: 50,000*1.0 = 50,000
2010: 4,000*1.04 = 4,160
$54,160
12/31/11
62,700
1.10
57,000
3,000
Base: 50,000*1.0 = 50,000
2010: 4,000*1.04 = 4,160
2011: 3,000*1.10 = 3,300
$57,460
12/31/12
58,800
1.20
49,000
(8,000)
Base: 49,000*1.0 = 49,000
(all other layers removed)
$49,000
12/31/13
76,230
1.21
63,000
14,000
Base: 49,000*1.0 = 49,000
2013: 14,000*1.21 = 16,940
$65,940
Lower of Cost or Market Review Problem
The Casper Golf Company has five inventory items as of December 31, 2013:
Product
Cost
Replacement Cost
Sales Price
Selling Costs
Shirts
$28,500
$30,000
$40,000
$8,000
Pants
44,500
43,000
50,000
4,000
Shoes
10,000
15,000
16,000
5,000
Golf Clubs
33,000
34,000
39,000
8,000
Golf Balls
20,000
14,000
25,000
4,000
Total Inventory at Cost: $136,000
Assume that Casper has a normal gross profit margin of 10% of selling price.
Required:
1. Compute the inventory value at 12/31/2013 assuming that the company
XYZ Company began operations on January 1, 2010, and uses the dollar-value LIFO method for externally reporting inventory. XYZ Company uses an external price index in its calculations. On January 1, 2010, XYZ Company had an inventory of $50,000. The following information has been extracted from inventory records:
Year Ended
December 31
Ending Inventory at Year-End Costs
Cost Index
(Relative to Base Year)
2010
$56,160
1.04
2011
$62,700
1.10
2012
$58,800
1.20
2013
$76,230
1.21
Required:
Compute XYZ’s ending inventory for each of the years ended December 31, 2010, 2011, 2012 and 2013.
Dollar Value LIFO
Date of dollar-value calculation
Inventory stated in current year costs
Price
Index
Inventory stated in base-year costs
Increase (decrease)
Adjusted
Layers
Reported Ending
Inventory on B/S
1/1/10
$50,000
1.00
$50,000
$50,000
$50,000*1.0 = $50,000
$50,000
12/31/10
56,160
1.04
54,000
4,000
Base: 50,000*1.0 = 50,000
2010: 4,000*1.04 = 4,160
$54,160
12/31/11
62,700
1.10
57,000
3,000
Base: 50,000*1.0 = 50,000
2010: 4,000*1.04 = 4,160
2011: 3,000*1.10 = 3,300
$57,460
12/31/12
58,800
1.20
49,000
(8,000)
Base: 49,000*1.0 = 49,000
(all other layers removed)
$49,000
12/31/13
76,230
1.21
63,000
14,000
Base: 49,000*1.0 = 49,000
2013: 14,000*1.21 = 16,940
$65,940
Lower of Cost or Market Review Problem
The Casper Golf Company has five inventory items as of December 31, 2013:
Product
Cost
Replacement Cost
Sales Price
Selling Costs
Shirts
$28,500
$30,000
$40,000
$8,000
Pants
44,500
43,000
50,000
4,000
Shoes
10,000
15,000
16,000
5,000
Golf Clubs
33,000
34,000
39,000
8,000
Golf Balls
20,000
14,000
25,000
4,000
Total Inventory at Cost: $136,000
Assume that Casper has a normal gross profit margin of 10% of selling price.
Required:
1. Compute the inventory value at 12/31/2013 assuming that the company