@Tootsie, Dollar-Value LIFO Inventory is one of the classic formula problems in FAR. It's hard to face FAR without getting ready with it. It's not easy to learn and remember it on the actual test under time pressure. But it's sure 1-5 easy points added to our final score if we at least know some of its basics. This topic shows up in one way or another.
Imagine Walmart importing same brands/styles of merchandise from China on various shipments (different dates). So that's how we apply Dollar-Value LIFO Inventory pricing.
I copied/pasted below the sample problem you posted above.
I decided I was going to memorize the lay-out of the $V-LIFO data in 3 columns, like B-C-D:
…………….BASE YR COST………. COST YR COST………..DOLLAR-VALUE INVY……..
YR-1……..$300,000………………….$300,000………………….. $300,000………………………..
……………. 100,000 {a}………………. ?*………………………………110,000 {c}………………………..
YR-2…….. $400,000…($1.10){b}….$440,000……………………$410,000 {d}………………………..
?* I really don't know what to fill out on this row or what formula to use. Any assistance is welcome.
{a} $400,000 – 300,000 = $100,000
{b} 440,000 ÷ 400,000 = $1.10
{c} a x b = $110,000
{d} $300,000 + 110,000 = $410,000
Is there an easy way to remember the dollar-value LIFO inventory method? I keep having trouble with these types of problems.
In Year 1, Cobb adopted the U.S. GAAP dollar-value LIFO inventory method. At that time, Cobb's ending inventory had a base-year cost and an end-of-year cost of $300,000. In Year 2, the ending inventory had a $400,000 base-year cost and a $440,000 end-of-year cost. What dollar-value LIFO inventory cost would be reported in Cobb's December 31, Year 2, balance sheet?
a. $430,000
b. $400,000
c. $440,000
d. $410,000 correct answer
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