Question

Pharoah Company has used the dollar-value LIFO method since January 1, 2017. Pharoah uses internal price indexes and multiple pools. At the end of calendar year 2018, the following data are available for Pharoah's inventory pool A At Current-Year Cost Inventory At Base-Year Cost $1,000,000 $1,000,000 January 1, 2017 December 31, 2017 1,250,000 1,375.000 December 31, 2018 1.300,000 1,495,000 Computing an internal price index and using the dollar value LIFO method, at what amount should the inventory in Pool A be reported at December 31, 2018? December 31, 2018 Price Index Dollar value LIFO inventory $

Answer 1

Computation of inventory at base year prices and change from prior year - Ivanhoe Company
Year end	Inventory at base year prices	Inventory at Current year cost	Price Index	Inventory Change from Prior Years
01-Jan-17	$1,000,000	$1,000,000	1.00	$0
31-Dec-17	$1,250,000	$1,375,000	1.10	$250,000
31-Dec-18	$1,300,000	$1,495,000	1.15	$50,000

Dollar value Inventory December 31, 2018 = $1,000,000*1 + $250,000*1.10 + $50,000 *1.15

= $1,332,500

price index = 1,332,500 / 1,300,000 = 1.025