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Ending inventory at dollar value, LIFO comes out to be $132,350.

Generally, several inventories are purchased during a given period at different points of time for different prices. So the basic problem arises at which price should the inventories be valued for computing COGS and ending inventory. For this purpose, different inventory methods have been adopted based on the assumption that inventories are used on FIFO or LIFO basis or are valued at average cost.

The LIFO basis tackles the issue of LIFO liquidation, which is derived by leaving the earliest inventory unsold due to following the last in first out sequence. In order to resolve this purpose, a new approach has been adopted to value the LIFO-based inventory on the base year prices. That is also called dollar-value LIFO inventory.

The steps to calculate the dollar value of LIFO are as follows 鈥�

a) The first step is to convert the ending inventory at current prices to the inventory at base prices. This is done by multiplying the ending inventory at the current price to the price index.

b) Once the ending inventory at base prices is determined, the next step is to compute the added layers in the given years. A layer is a difference between the ending and beginning inventory at base-year prices. The layer is computed for each given year. For the base year, the layer would be the same as the ending balance.

c) If the layer has a negative value for any year, that layer would be adjusted with the most recent layers, and the final layer would be treated for all the years until the year which has a negative layer.

d) In the next step, all the computed layers are converted into the current year dollar value by taking the product of layer and price index for every year.

e) In the last step, the dollar value LIFO is computed by taking the sum of all layers at the dollar value LIFO base.