Suppose that Badger's 2014 ending inventory, valued at year-end costs, was $143,000 and that the relative cost index for this inventory in 2014 was 1.10. In determining the inventory balance should Badger report in its 12/31/14 balance sheet:
A)An additional layer of $23,000 is added to the 1/1/14 balance.
B)An additional layer of $22,000 is added to the 1/1/14 balance.
C)An additional layer of $11,000 is added to the 1/1/14 balance.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The additional layer is calculated by dividing the ending inventory by the cost index: $143,000 / 1.10 = $130,000. The difference between the ending inventory and the adjusted inventory is $143,000 - $130,000 = $13,000. However, the question asks for the additional layer, which is $11,000.

Suppose That Badger's 2014 Ending Inventory, Valued at Year-End Costs