Roberts Company manufactures one product. On December 31, 2004, Roberts adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO inventory method was $200,000. Inventory data are as follows:
Inventory at Price index
Year year-end prices (base year 2004)
2005 $205,000 1.05
2006 240,000 1.10
2007 270,000 1.23
Instructions
Compute the inventory at December 31, 2005, 2006, & 2007 using the dollar-value LIFO method for each year. (round all computations to the nearest dollar)
Part B
Martin Co. in advertently overstates its 2005 ending inventory by $2,000 and understates its 2006 ending inventory by $5,000. Determine the effect of this error on the following accounts over the following period. State whether the account is overstated, understated or correct and by how much if over- or understated.
1. Cost of goods sold in 2005 .........................
2. Retained earnings at end of 2005 .........................
3. Net income in 2006 ........................
4. Cost of goods sold in 2007 .........................
5. Retained Earnings at end of 2007 .........................