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Chapter 9: Question E9-27 (page 482)

Presented below is information related to Langston Hughes Corporation. Price LIFO Index Cost Retail Inventory on December 31, 2017, when dollar-value LIFO is adopted 100 \(36,000 \) 74,500 Inventory, December 31, 2018 110 ? 100,100 Instructions Compute the ending inventory under the dollar-value LIFO method at December 31, 2018. The cost-to-retail ratio for 2018 was 60%.

Short Answer

Expert verified

The ending inventory value under the dollar-value LIFO method equals.

Step by step solution

01

Definition of dollar-value LIFO retail method

Under this method, the change in the price level is eliminated in the inventory value to report the inventory per real increase, not per increase in the dollar.

02

Calculation of ending inventory at LIFO cost

The ending inventory at LIFO cost is calculated as follows:

Calculation of Ending Inventory at LIFO Cost

Ending inventory at retail (deflated) ($100,100/1.10)

$91,000

Beginning inventory at retail

74,500

Real increase in inventory at retail

16,500

Ending inventory at retail on LIFO basis

First layer

36,000

Second layer ($16,500 x 1.10 x 60%)

10,890

$46,890

Thus, the ending inventory is $46,890.

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Most popular questions from this chapter

At December 31, 2017, Indigo Girls Company has outstanding noncancelable purchase commitments for 36,000 gallons, at \(3.00 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Instructions (a) Assuming that the market price as of December 31, 2017, is \)3.30, how would this matter be treated in the accounts and statements? Explain. (b) Assuming that the market price as of December 31, 2017, is \(2.70, instead of \)3.30, how would you treat this situation in the accounts and statements? (c) Give the entry in January 2018, when the 36,000-gallon shipment is received, assuming that the situation given in (b) above existed at December 31, 2017, and that the market price in January 2018 was $2.70 per gallon. Give an explanation of your treatment.

Riegel Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, consists of products D, E, F, G, H, and I. Relevant per unit data for these products appear below. Item DE F GH I Estimated selling price \(120 \)110 \(95 \)90 \(110 \)90 Cost 75 80 80 80 50 36 Cost to complete 30 30 25 35 30 30 Selling costs 10 18 10 20 10 20 Instructions Using the LCNRV rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2017, for each of the inventory items above.

Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2018 at a cost of \(1,000,000. At December 31, 2017, the raw materials to be purchased have a market value of \)950,000. Prepare any necessary December 31, 2017, entry.

Remmers Company manufactures desks. Most of the company鈥檚 desks are standard models and are sold on the basis of catalog prices. At December 31, 2017, the following finished desks (10 desks in each category) appear in the company鈥檚 inventory. Finished Desks A B C D 2017 catalog selling price \(45 \)48 \(90 \)105 FIFO cost per inventory list 12/31/17 47 45 83 96 Estimated cost to complete and sell 5 11 26 20 2018 catalog selling price 50 54 90 120 The 2017 catalog was in effect through November 2017, and the 2018 catalog is effective as of December 1; catalog prices are net of the usual discounts.

Phil Collins Realty Corporation purchased a tract of unimproved land for \(55,000. This land was improved and subdivided into building lots at an additional cost of \)34,460. These building lots were all of the same size but owing to differences in location were offered for sale at different prices as follows. Group No. of Lots Price per Lot 1 9 \(3,000 2 15 4,000 3 17 2,400 Operating expenses for the year allocated to this project total \)18,200. Lots unsold at the year-end were as follows. Group 1 5 lots Group 2 7 lots Group 3 2 lots Instructions At the end of the fiscal year Phil Collins Realty Corporation instructs you to arrive at the net income realized on this operation to date.
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