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Cullumber Company has a beginning inventory in year one of $1,355,000 and an ending inventory of $1,650,000. The price level has increased from 100 at the beginning of the year to 110 at the end of year one. Calculate the ending inventory under the dollar-value LIFO method.

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Answer:

Cullumber Company

Ending Inventory under the dollar-value LIFO method:

$1,500,000

Explanation:

a) Data and Calculations:

Beginning Inventory = $1,355,000

Ending Inventory = $1,650,000

Beginning Inventory at the year-end price = $1,355,000/100 * 110 = $1,490,500

Ending inventory at the base price = $1,650,000/110 * 100 = $1,500,000

b) The ending inventory value should be $1,500,000.  This will reflect the base price without the increase in the price level from 100 to 110.  It will also make the beginning and ending inventories to be comparable.

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