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Question P8-10

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Intermediate Accounting (Kieso)
Found in: Page 435

Short Answer

Presented below is information related to Kaisson Corporation for the last 3 years.

Quantities Base-Year Cost Current-Year Cost

in Ending

Item Inventories Unit Cost Amount Unit Cost Amount

December 31, 2016

A 9,000 $2.00 $18,000 $2.20 $19,800

B 6,000 3.00 18,000 3.55 21,300

C 4,000 5.00 20,000 5.40 21,600

Totals $56,000 $62,700

December 31, 2017

A 9,000 $2.00 $18,000 $2.60 $23,400

B 6,800 3.00 20,400 3.75 25,500

C 6,000 5.00 30,000 6.40 38,400

Totals $68,400 $87,300

December 31, 2018

A 8,000 $2.00 $16,000 $2.70 $21,600

B 8,000 3.00 24,000 4.00 32,000

C 6,000 5.00 30,000 6.20 37,200

Totals $70,000 $90,800

Instructions

Compute the ending inventories under the dollar-value LIFO method for 2016, 2017, and 2018. The base period is January 1, 2016,and the beginning inventory cost at that date was $45,000. Compute indexes to two decimal places.

Dollar value LIFO for 2016, 2017, and 2018 are $57,320, $73,192, and $75,256 respectively. Price index are 112, 128, and 129 for given years, respectively.

See the step by step solution

Step by Step Solution

Price index schedule

Inventories at Current Year cost

/

Inventories at Base year cost

=

Price Index

Dec 2016

$62,700

/

$56,000

=

1.12 or 112%

Dec 2017

$87,300

/

$68,400

=

1.28 or 128%

Dec 2018

$90,800

/

$70,000

=

1.29 or 129%

Inventories at dollar value LIFO

Date

Ending inventory at base year

Layer

X

Price Index

=

Dollar value LIFO

2015

$45,000

$45,000

X

100

=

$45,000

2016

$56,000

$11,000

X

112

=

$12,320

$57,320

2017

$68,400

$12,400

X

128

=

$15,872

$73,192

2018

$70,000

$1,600

X

129

=

$2,064

$70,000

$75,256

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