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.
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Ending Inventory
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|
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Date
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(End-of-Year Prices)
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Price Index
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Dec, 31,2010
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$80,000
|
100
|
|
Dec. 31, 2011
|
111,300
|
105
|
|
Dec. 31, 2012
|
108,000
|
120
|
|
Dec. 31, 2013
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128,700
|
130
|
|
Dec. 31, 2014
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147,000
|
140
|
|
Dec. 31, 2015
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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.