Computing and Recording Ending Inventory using Dollar$-$Value LIFO

On January $1$ of Year $5,$ Crow Company changed from FIFO to LIFO for income tax and external reporting purposes. On that same date, the beginning FIFO inventory $($the base inventory for LIFO purposes$)$ was $$95,000.$ The following information is available from Crow$$s records for Year $5$ through Year $8.$

YearEnding Inventory

on a FIFO BasisEnding Inventory

at Base Year CostsYear $5$$$125,000$$$113,600$Year $6110,00084,600$Year $7115,00085,200$Year $8130,00092,900$

$$

a$.$ Compute the price indices used to calculate ending inventory at base year costs for Years $5,6,7,$ and $8.$ Hint: Divide ending inventory on a FIFO basis by ending inventory at base year for each year.$$

Note: Enter each price index rounded to two digits after the decimal; for example, enter an index of $1\mathrm{.}42$ for $1\mathrm{.}424$ or enter an index of $1\mathrm{.}43$ for $1\mathrm{.}425.$

YearPrice

IndexYear $4$Answer $1$

Year $5$Answer $2$

Year $6$Answer $3$

Year $7$Answer $4$

Year $8$Answer $5$

b$.$ Compute the ending inventory on a dollar$-$value LIFO basis for Years $5,6,7,$ and $8.$

In step four $($restating layers of inventory into current year dollars$)$ use rounded indices from part a$.$

Round final answers to the nearest whole dollar.

Dollar$-$value LIFO ending inventory, Year $5$Answer $6$

Dollar$-$value LIFO ending inventory, Year $6$Answer $7$

Dollar$-$value LIFO ending inventory, Year $7$Answer $8$

Dollar$-$value LIFO ending inventory, Year $8$Answer $9$

c$.$ Prepare the journal entry at each year$-$end, Year $5$ through Year $8,$ to adjust inventory to LIFO.

DateAccount NameDr.Cr$.$Dec. $31,$ Year $5$Answer $10$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $11$

Answer $12$

Answer $13$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $14$

Answer $15$

Dec. $31,$ Year $6$Answer $16$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $17$

Answer $18$

Answer $19$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $20$

Answer $21$

Dec. $31,$ Year $7$Answer $22$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $23$

Answer $24$

Answer $25$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $26$

Answer $27$

Dec. $31,$ Year $8$Answer $28$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $29$

Answer $30$

Answer $31$CashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight$-$inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN$/$A

Answer $32$

Answer $33$