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kars82
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| Posted: 25 Jun 2009 at 12:38 | IP Logged
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Athens corp. adopted the dollar-value LIFO method of inventory valuation on Dec 2000. Its inventory on that date was $100,000 and price index was 100. Other info:
Date &n bsp;Inventory Cost Price index
Dec01 & nbsp; & nbsp;128400 & nbsp; 107
Dec02 & nbsp; & nbsp; 145000 & nbsp; 125
Dec03 & nbsp; & nbsp; 169000 & nbsp; 130
What is the cost of inventory at dollar – lifo on 31/12/02?
1)116000
2)117120
3)117400
4)145000
The correct answer is 2. Can some1 please explain the calculation?
The soluation provided :
On 31/12/01:
128400/1.07=120000
20000*1.07= 21400+100000
On 31/12/02
145000/1.45=116000
16000*1.07=17120 +100000
Why does it use 1.07 in year 2 to multiply with 16000?
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kars82
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| Posted: 25 Jun 2009 at 18:48 | IP Logged
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Well, i think i figured out the solution.
In this case, the layer of inventory added in year 1 at base year is 20000. So we use 1.07 for Dec02.
Now in Dec03, the layer of inventory added is 16000. This is less than year 2. So all of this layer relates to inventory added in year 2. So we use 1.07 only. Had the layer been 30000, then we would use 1.07 for 20000 and 1.45 for 10000. Hope its right. Can some1 please confirm this?
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kj_nyc
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| Posted: 25 Jun 2009 at 18:56 | IP Logged
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Yep, you're right on about the 2001 layer being decreased in 2002.
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kars82
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| Posted: 25 Jun 2009 at 19:09 | IP Logged
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Hey thanx..!!! When do u plan to give the exam???
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kj_nyc
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| Posted: 25 Jun 2009 at 19:16 | IP Logged
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You're welcome. FAR is July 2, next Thursday for me! I've been cramming for this beast for almost 2 months now. How about you?
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Topic: Dollar-LIFO --Please help
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