Double Extension: Dollar Value LIFO On January 1, 2007 Lucas Distributors, Inc., adopted the dollar value LIFO inventory method for income tax and external financial reporting. However, Lucas continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Lucas uses internal conversion cost 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 is comprised of 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, 1/1/07 |
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Product A |
12,000 |
$30 |
$360,000 |
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Product B |
8,000 |
25 |
200,000 |
|
$560,000 |
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Inventory, 12/31/07 |
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Product A |
17,000 |
$35 |
$595,000 |
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Product B |
9,000 |
28 |
252,000 |
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$847,000 |
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Inventory, 12/31/08 |
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Product A |
13,000 |
$40 |
$520,000 |
|
Product B |
10,000 |
32 |
320,000 |
|
$840,000 |
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Required
1. Prepare a schedule to compute the internal conversion cost indexes for 2007 and 2008. Round indexes to two decimal places.
2. Prepare a schedule to compute the inventory amounts at December 31, 2007 and 2008, using the dollar value LIFO inventory method.