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Joined: 10 Oct 2008
Location: United States
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Posts: 120
Posted: 30 Dec 2009 at 13:27 | IP Logged  

On December 31, Year 3, Jason Company adopted the dollar-value LIFO retail inventory method.  Inventory data for Year 4 are as follows:


                                                                 LIFO Cost       Retail     


Inventory, 12/31/ Year 3                         360,000           500,000

Inventory, 12/31/ Year 4                                                    660,000

Increase in price level for Year 4                                      10%

Cost-retail ratio for Year 4                                                  70%


Under the dollar-value LIFO retail method, Jasonˇ¦s inventory at December 31, Year 4, is:


Answer: 437,000


Does anyone know how to work on this question?  Thanks!!

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Joined: 19 Sep 2008
Online Status: Offline
Posts: 46
Posted: 30 Dec 2009 at 16:18 | IP Logged  

Let me take a shot at this.

First, we have to get the retail prices on the same level. I took the 500,000 * 110% to get to the year 4 price level. That total, 550,000, is then subtracted from the year 4 retail inv figure of 660,000 to come up with a 110,000 difference. The 110,000 is the actual increase in retail inventory for the year.

The problem then says that the cost-retail ratio is 70%. I take the 110,000 times 70% and you get 77,000, which is the increase in LIFO cost inventory for yr 4. Add the 77, to the 360, and you get 437,!

I hope that makes sense.

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