On January 1, 2020, Bonanza Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external fi nancial reporting purposes. However, Bonanza continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Bonanza uses internal conversion price indexes and the multiple pools approach under which substantially identical inventory items are grouped into LIFO inventory pools. The following data were available for inventory pool no. 1, which comprises products A and B, for the 2 years following the adoption of LIFO.

Instructions

a. Prepare a schedule to compute the internal conversion price indexes for 2020 and 2021. Round indexes to two decimal places.

b. Prepare a schedule to compute the inventory amounts at December 31, 2020 and 2021, using the dollar-value LIFO inventory method.

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FIFO Basis per Records Unit Total Units Cost Cost Inventory, 1/1/20 Product A $30 $300,000 10,000 Product B 9,000 25 225,000 $525,000 Inventory, 12/31/20 Product A $612,000 17,000 36 Product B 234,000 9,000 26 $846,000 Inventory, 12/31/21 Product A $520,000 13,000 40 Product B 10,000 32 320,000 $840,000