Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015. The...

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Accounting

Olson Company adopted the dollar-value LIFO method for inventoryvaluation at the beginning of 2015. The following information aboutthe inventory at the end of each year is available from Olson'srecords:
Year Current Costs Index
2014 $50,000 100
2015 60,000 108
2016 70,000 115
2017 73,000 125
2018 78,000 135
Required:
1. Calculate the dollar-value LIFO inventory at the end of eachyear. Do not round your intermediate calculations. Round finalanswers to the nearest dollar.
2015 2016 2017 2018
Ending Inventory at LIFO $ $ $
$
2. Prepare the appropriate disclosures for the 2018 annualreport if Olson uses current cost internally and LIFO for financialreporting. Round final answers to the nearest dollar.
2018 2017
Inventory at current cost $ $
Less: LIFO reserve
Inventory at LIFO $ $

Year	Current Costs	Index

2014	$50,000	100
2015	60,000	108
2016	70,000	115
2017	73,000	125
2018	78,000	135

Answer & Explanation Solved by verified expert

3.7 Ratings (619 Votes)

Solution 1:

Computation of inventory at base year prices and change from prior year - Olson Company
Year	Inventory at end of year prices	Price index	Inventory at base year prices	Change from Prior Years
2014	$50,000.00	100	$50,000	$0
2015	$60,000.00	108	$55,556	$5,556
2016	$70,000.00	115	$60,870	$5,314
2017	$73,000.00	125	$58,400	-$2,470
2018	$78,000.00	135	$57,778	-$622

Computation of dollar value inventory - LIFO
Particulars	Amount
December 31, 2014:
$50,000*1	$50,000

December 31, 2015:
$50,000*1	$50,000
$5,556*1.08	$6,000

Inventory at Dec 31, 2015	$56,000

December 31, 2016:
$50,000*1	$50,000
$5,556*1.08	$6,000
$5,314*1.15	$6,111

Inventory at Dec 31, 2016	$62,112

December 31, 2017:
$50,000*1	$50,000
$5,556*1.08	$6,000
$2,844*1.15	$3,271

Inventory at Dec 31, 2017	$59,271

December 31, 2018:
$50,000*1	$50,000
$5,556*1.08	$6,000
$2,222*1.15	$2,555

Inventory at Dec 31, 2018	$58,556

Solution 2:

Particulars	2018	2017
Inventory at current cost	$78,000.00	$73,000.00
Less: LIFO Reserve	$19,444.00	$13,729.00
Inventory at LIFO	$58,556.00	$59,271.00

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Transcribed Image Text

Olson Company adopted the dollar-value LIFO method for inventoryvaluation at the beginning of 2015. The following information aboutthe inventory at the end of each year is available from Olson'srecords:YearCurrent CostsIndex2014$50,000100201560,000108201670,000115201773,000125201878,000135Required:1. Calculate the dollar-value LIFO inventory at the end of eachyear. Do not round your intermediate calculations. Round finalanswers to the nearest dollar.2015201620172018Ending Inventory at LIFO$$$$2. Prepare the appropriate disclosures for the 2018 annualreport if Olson uses current cost internally and LIFO for financialreporting. Round final answers to the nearest dollar.20182017Inventory at current cost$$Less: LIFO reserveInventory at LIFO$$