The Bravo Company manufactures a single product.On December 31,2012 Bravo adopted the dollar-value LIFO inventory method.The inventory on that date using the dollar-value LIFO inventory method was determined to be $500,000.Inventory data for succeeding years are as follows:
$2012$500,0001.002013527,0001.082014635,0001.152015645,0001.21\begin{array}{rrr}\text { Year Ended December 31 } & \begin{array}{c}\text { Inventory at Respective } \\\text { Year-end Prices }\end{array} & \begin{array}{c}\text { Relevant Price Index } \\\text { (Base Year 2012) }\end{array}\\2012 & \$ 500,000 & 1.00 \\2013 & 527,000 & 1.08 \\2014 & 635,000 & 1.15 \\2015 & 645,000 & 1.21\end{array}$
Required:
Compute the inventory amount at December 31,2013,2014,and 2015 using the dollar-value LIFO inventory method for each year.(Round all amounts to the nearest dollar.)

Question

The Bravo Company manufactures a single product.On December 31,2012 Bravo adopted the dollar-value LIFO inventory method.The inventory on that date using the dollar-value LIFO inventory method was determined to be $500,000.Inventory data for succeeding years are as follows:

2012$500,0001.002013527,0001.082014635,0001.152015645,0001.21\begin{array}{rrr}\text { Year Ended December 31 } & \begin{array}{c}\text { Inventory at Respective } \\\text { Year-end Prices }\end{array} & \begin{array}{c}\text { Relevant Price Index } \\\text { (Base Year 2012) }\end{array}\\2012 & \$ 500,000 & 1.00 \\2013 & 527,000 & 1.08 \\2014 & 635,000 & 1.15 \\2015 & 645,000 & 1.21\end{array}

Required:
Compute the inventory amount at December 31,2013,2014,and 2015 using the dollar-value LIFO inventory method for each year.(Round all amounts to the nearest dollar.)

Madison Cogdill · Accepted Answer

Final Answer :

To compute ending inventory at base year prices,divide the year-end prices of each year by the respective price index,then separate the layers to compute ending inventory at LIFO Cost.Here are the computations:

2013$527,0001.08$487,9632014635,0001.15552,1742015645,0001.21533,058\begin{array}{rrrr}&&(\text { External Price }\\\text { Year Ended } & \text { Inventory at Respective } & \text { Index (Base Year } & \text { Inventory at Base } \\\text { December 31 } & \text { Year-end Prices } & \text { 2012) } & \text { Year (2012) Prices }\\2013 & \$ 527,000 & 1.08 & \$ 487,963 \\2014 & 635,000 & 1.15 & 552,174 \\2015 & 645,000 & 1.21 & 533,058\end{array}

$To compute ending inventory at base year prices,divide the year-end prices of each year by the respective price index,then separate the layers to compute ending inventory at LIFO Cost.Here are the computations: \begin{array}{rrrr}&&(\text { External Price }\\ \text { Year Ended } & \text { Inventory at Respective } & \text { Index (Base Year } & \text { Inventory at Base } \\ \text { December 31 } & \text { Year-end Prices } & \text { 2012) } & \text { Year (2012) Prices }\\ 2013 & \$ 527,000 & 1.08 & \$ 487,963 \\ 2014 & 635,000 & 1.15 & 552,174 \\ 2015 & 645,000 & 1.21 & 533,058 \end{array} Notice that the base layer was partially depleted in 2013 and that the 2014 layer was partially depleted in 2015.$ Notice that the base layer was partially depleted in 2013 and that the 2014 layer was partially depleted in 2015.

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