Dollar Value LIFO III (Example)

Year 1

Index

Beginning inventory

$200.0

100

Purchases

$2,200.0

total goods available for sale

$2,400.0

ending inventory at current cost (per count)

$330.0

110

ending inventory at base cost: 330/110*100

$351.0

less beginning inventory at base cost

-$200.0

increase at base cost

$100.0

increase at current cost: 100*110/100

$110.0

$ value LIFO ending inventory:

increase

$110.0

beginning inventory

$200.0

$310.0

cost of goods sold:

$2,090.0

Example continued:

Year 2

2 layers: index 100, index 110

Beginning inventory (dollar value LIFO)

$310.0

Purchases

$3,000.0

total goods available for sale

$3,310.0

ending inventory at current cost (per count)

$400.0

115

ending inventory at base cost: 400/115*100

$347.8

less beginning inventory at base cost

-$351.0

increase at base cost

$47.8

increase at current cost: 100*110/100

48*115/100

$55.0

$ value LIFO ending inventory:

increase

$55.0

beginning inventory

$310.0

$365.0

cost of goods sold:

$2,945.0

Example continued:

Year 3

3 layers: index 100, index 110 and 115

Beginning inventory (dollar value LIFO)

$365.0

Purchases

$3,351.0

total goods available for sale

$3,665.0

ending inventory at current cost (per count)

$400.0

120

ending inventory at base cost: 400/115*100

400/120*100

$333.3

less beginning inventory at base cost

-$347.8

decrease at base cost

-$14.5

decrease at current cost: 67*115/100

14*115/100

-$16.7

$ value LIFO ending inventory:

increase

-$16.7

beginning inventory

$365.0

$ value LIFO ending inventory:

$348.3

cost of goods sold:

3316.667

Alternative calculation:

ending inventory at base cost: 400/115*100

400/120*100

$333.3

layer at index 115:

$33.0

$38.3

layers at 100 and 110

$310.0

$ value LIFO ending inventory:

$348.3

Note that because of the reduction, there will never be a layer at index 120:

Year 4

3 layers: index 100, index 110 and 115

Beginning inventory (dollar value LIFO)

$348.3

Purchases

$3,800.0

total goods available for sale

$4,148.3

ending inventory at current cost (per count)

$600.0

125

ending inventory at base cost: 400/115*100

600/125*100

$480.0

less beginning inventory at base cost

-$333.3

increase at base cost

$146.7

increase at current cost: 146.7*125/100

14*115/100

$183.3

$ value LIFO ending inventory:

increase

$183.3

beginning inventory

$348.3

$ value LIFO ending inventory:

$531.7

cost of goods sold:

3616.667

The ending inventory in year 4 consists of the folowing layers:

base

current

base layer

$200.0

$200.0

100

year 1

$100.0

$110.0

110

year 2

$33.0

$38.3

115

year 4

$146.7

$183.3

125

$479.7

$531.7

for more fun go to dollar value retail LIFO!

return to chapter 7 resource page