(Internal Indexes—Dollar Value LIFO) On January 1, 2012, Bonanza Wholesalers Inc. adopted the dollar value LIFO inventory method for income tax and external financial 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.
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FIFO Basis per Records |
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Units |
Unit Cost |
Total Cost |
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Inventory, 1/1/12 |
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Product A |
10,000 |
$30 |
$300,000 |
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Product B |
9,000 |
25 |
225,000 |
|
$525,000 |
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Inventory, 12/31/12 |
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Product A |
17,000 |
36 |
$612,000 |
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Product B |
9,000 |
26 |
234,000 |
|
$846,000 |
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Inventory, 12/31/13 |
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Product A |
13,000 |
40 |
$520,000 |
|
Product B |
10,000 |
32 |
320,000 |
|
$840,000 |
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Instructions
(a) Prepare a schedule to compute the internal conversion price indexes for 2012 and 2013. Round indexes to two decimal places.
(b) Prepare a schedule to compute the inventory amounts at December 31, 2012 and 2013, using the dollar value LIFO inventory method.