Question

The following information was provided by Mabie Company Year 2014 2015 2016 2017 2018 Ending Inventory at Average Cost S530,000 620.000 610.000 4 85.000 620.000 Cumulative Price Index 100 105 110 111 115 Mabie adopted the dollar-value LIFO method using 2014 as the base year. Required: a. Compute Mabie's ending inventory under the dollar-value LIFO method for the years 2014 through 2018. b. Prepare the journal entries for 2015 through 2018 to adjust inventory to the dollar value LIFO basis. c. Determine the ending balance of the LIFO reserve for 2015 through 2018

Answer 1

INDEXATION FROM 2014 TO 2018:

Year	Formula/Calculation	Amount($)
2014	(530,000*100)/100	5,30,000
2015	(620,000*105)/100	6,51,000
2016	(610,000*110)/100	6,71,000
2017	(485,000*111)/100	5,38,350
2018	(620,000*115)/100	7,13,000

JOURNAL ENTRIES:

Year	Particulars	Debit($)	Credit($)
2015	Purchase a/c Dr	31,000
	To Revaluation Reserve a/c		31,000
	[Being Revaluation of invenotry]
2016	Purchase a/c Dr	61,000
	To Revaluation Reserve a/c		61,000
	[Being Revaluation of invenotry]
2017	Purchase a/c Dr	53,350
	To Revaluation Reserve a/c		53,350
	[Being Revaluation of invenotry]
2018	Purchase a/c Dr	93,000
	To Revaluation Reserve a/c		93,000
	[Being Revaluation of invenotry]

Notes:

Instead of purchase a/c even inventory a/c can be used if the relevent a/c is created.

BALANCE OF LIFO/REVALUATION RESERVE A/C:

Year	Reserve Value
2015	31,000
2016	61,000
2017	53,350
2018	93,000