On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $265,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:

Year Ended December 31 Inventory year end costs Cost index(relative to base year)
2021 $340,000 1.02
2022 350,000 1.06
2023 400,000 1.07
2024 430,000 1.10

Required:
Calculate inventory amounts at the end of each year.

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mebert · Accepted Answer

Answer:Avondale LumberRebasing the Inventory at year-end using the dollar-value LIFO inventory method:Year Ended Inventory year Cost index Inventory AmountDecember 31 end costs (relative to base year) at year-end2021 $340,000 1.02 $333,3332022 350,000 1.06 $330,1892023 400,000 1.07 $373,8322024 430,000 1.10 $390,909Explanation:a) Data:Year Ended Inventory year Cost indexDecember 31 end costs (relative to base year)2021 $340,000 1.022022 350,000 1.062023 400,000 1.072024 430,000 1.10b) The inventory at year-end costs is rebased using the cost index that is relative to the base year, by dividing the inventory costs by the cost index.

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