Use the following information for 121 and 122
RF Company had January 1 inventory of $200,000 when it adopted dollar-value LIFO. During the year, purchases were $1,200,000 and sales were $2,000,000. December 31 inventory at year-end prices was $286,720, and the price index was 112.
-What is RF Company's ending inventory?
A) $200,000.
B) $256,000.
C) $262,720.
D) $286,720.

Question

Quizplus · Accepted Answer

The ending inventory is calculated using the dollar-value LIFO method. First, we need to determine the ending inventory at base-year prices by dividing the ending inventory at year-end prices by the price index: $286,720 / 1.12 = $256,000. Then, we use the LIFO layers to determine the ending inventory at current-year costs: $200,000 (beginning inventory) + $1,200,000 (purchases) - $1,656,000 (LIFO liquidation of sales) + $256,000 (ending inventory at base-year prices) = $262,720. Therefore, the correct answer is C.

Use the Following Information for 121 and 122