- 13 -
B 2,000 4.00 8,000
C 500 2.00 1,000
Total base year cost, Jan. 1, yr. 1 14,000
At December 31, year 1, the closing inventory of Pool No. 1
contains 3000 units of A, 1,000 units of B, and 500 units of C.
T computes the current-year cost of the items making up the pool
by reference to the actual cost of the goods most recently
purchased. The most recent purchases of items A, B, and C are as
follows:
Quantity Unit
Items Purchase Date Purchased Cost
A Dec. 15, yr. 1 3,500 $6.00
B Dec. 10, yr. 1 2,000 5.00
C Nov. 1, yr. 1 500 2.50
The inventory of Pool No. 1 at December 31, year 1, shown at
base-year and current-year costs is as follows:
Dec. 31, yr. 1,
inventory at Dec. 31, yr. 1,
Jan. 1, yr. 1, inventory at
base-year cost current-year cost
Items Quantity Unit Cost Amount Unit Cost Amount
A 3,000 $5.00 $15,000 $6.00 $18,000
B 1,000 4.00 4,000 5.00 5,000
C 500 2.00 1,000 2.50 1,250
Totals 20,000 24,250
If the amount of the December 31, year 1, inventory at base-
year cost were equal to, or less than, the base-year cost of
$14,000 at January 1, year 1, that amount would be the ending
LIFO inventory at December 31, year 1. However, since the base-
year cost of the ending LIFO inventory at December 31, year 1,
amounts to $20,000, and is in excess of the $14,000 base-year
cost of the opening inventory for that year, there is a $6,000
increment in Pool No. 1 during that year. That increment must be
valued at current-year cost; i.e., multiplied by the ratio of
$24,250 to $20,000 (24,250/20,000), or 121.25 percent. The LIFO
value of the inventory in Pool No. 1 at December 31, year 1, is
$21,275, computed as follows:
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