11B (L0 4) (Dollar-Value LIFO) Landon Company bottles a variety of soft drinks. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works. He has provided you with the following information about purchases made over a 6-year period. Ending Inventory Date (End-of-Year Prices) Price Index Dec. 31, 2016 $212,000 100 Dec. 31, 2017 226,600 103 Dec. 31, 2018 264,000 110 Dec. 31, 2019 261,000 116 Dec. 31, 2020 324,000 120 Dec. 31, 2021 312,500 125 You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value. Instructions (a) Compute the ending inventory for Landon Company for 2016 through 2021 using dollar-value LIFO. (b) Using your computation schedules as your illustration, write a step-by-step set of instructions explaining how the calculations are done. Begin your explanation by briefly explaining the theory behind this inventory method, including the purpose of putting all amounts into base-year price levels.
P8.11B (L0 4) (Dollar-Value LIFO) Landon Company bottles a variety of soft drinks. Recently, the company decided to value
its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the
inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method
works.
He has provided you with the following information about purchases made over a 6-year period.
Ending Inventory
Date (End-of-Year Prices) Price Index
Dec. 31, 2016 $212,000 100
Dec. 31, 2017 226,600 103
Dec. 31, 2018 264,000 110
Dec. 31, 2019 261,000 116
Dec. 31, 2020 324,000 120
Dec. 31, 2021 312,500 125
You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to
leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year
value.
Instructions
(a) Compute the ending inventory for Landon Company for 2016 through 2021 using dollar-value LIFO.
(b) Using your computation
purpose of putting all amounts into base-year price levels.
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