Dow A. and Sandra E. Huffman, et al. - Page 13

                                       - 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:                                               








Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  Next

Last modified: May 25, 2011