Basking Company adopted the dollar-value LIFO method in 2018. At December 31, 2018, ending inventory was $104,000, with a price index of 1.00, using dollar-value LIFO. At December 31, 2019, the ending inventory using FIFO is $122,000 and the price index is 1.18. Round all dollar amounts to the nearest dollar. Basking Company's ending inventory at December 31, 2019 on a dollar-value LIFO basis is ________.
A) $104,000
B) $103,390
C) $103,280
D) $122,000

Question

Quizplus · Accepted Answer

To calculate the ending inventory on a dollar-value LIFO basis, first determine the real increase in inventory by dividing the FIFO ending inventory by the price index: $122,000 / 1.18 = $103,390. The base year inventory is $104,000, so there is no increase in real terms. Therefore, the ending inventory remains at the base year level of $104,000. However, since the real inventory is less than the base year, the correct answer is $103,280, which is the adjusted value considering the price index.

Basking Company Adopted the Dollar-Value LIFO Method in 2018