On January 1, 2024, the National Furniture Company adopted the dollar-value LIFO method of computing inventory. An internal cost index is used to convert ending inventory to base year. Inventory on January 1 was $203.000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Year Ended December 31 2024 2025 2026 Inventory at Year-End Costs $ 265,680 306,800 309,350 Cost Index (Relative to Base Year) $ 1.00 1.12 1.15 Required: Compute inventory amounts at the end of each year using the dollar-value LIFO method.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.