P8.11 (LO 4) Writing (Dollar-Value LIFO) Richardson Company cans a variety of vegetable-type soups. 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. Date Ending Inventory (End-of-Year Prices) $ 80,000 Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2021 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 Richardson 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. 111,300 108,000 128,700 Price Index 147,000 174,000 100 105 120 130 140 145
P8.11 (LO 4) Writing (Dollar-Value LIFO) Richardson Company cans a variety of vegetable-type soups. 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. Date Ending Inventory (End-of-Year Prices) $ 80,000 Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2021 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 Richardson 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. 111,300 108,000 128,700 Price Index 147,000 174,000 100 105 120 130 140 145
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:P8.11 (104) Writing (Dollar-Value LIFO) Richardson Company cans a variety of vegetable-type soups. 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.
Dec. 31, 2016
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2020;
Date
Ending Inventory
(End-of-Year Prices)
$ 80,000
111,300
108,000
128,700
147,000
174,000
Price Index
100
105
120
130
140
145
Dec. 31, 2021
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 Richardson Company for 2016 through 2021 using dollar-value LIPO.
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.
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