Richardson company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who acounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works.provided you with the following information about purchases made over a 6-year period.
|
Ending Inventory
|
|
Date
|
(End-of-Year Prices)
|
Price Index
|
Dec, 31,2010
|
$80,000
|
100
|
Dec. 31, 2011
|
111,300
|
105
|
Dec. 31, 2012
|
108,000
|
120
|
Dec. 31, 2013
|
128,700
|
130
|
Dec. 31, 2014
|
147,000
|
140
|
Dec. 31, 2015
|
174,000
|
145
|
Explain how these calculations are done and why needs to put all inventories at a base-year value.
Instructions:
a. Compute the ending inventory for Richardson Company for 2010 through 2015 using dollar -value LIFO.
b. Using your computation schedules as your illustration, write a step-by-step set of instructions explaining how the calculations are done.Begin your explanation by briefly explaining the theory behind this inventory method, including the purpose of putting all amounts into base - period levels.