Compute the ending inventory for richardson company

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Question - 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 accounts 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 how this new method works. He has provided you with the following information about purchases made over a 6-year period.

Date

Ending Inventory (End-Of-Year-Prices)

Price Index

Dec. 31 2010

$80,000

100

Dec. 31 2011

111,300

105

Dec. 31 2012

108,000

120

Dec. 31 2013

128,700

130

Dec. 31 2014

147,000

140

Dec. 31 2015

174,000

145

(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 the inventory method, including the purpose of putting all amounts into base-year price levels.

Reference no: EM132031617

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