(Dolla r – V alue LIFO) Richardson Company cans a variety of vegetable-type soups

(Dolla r – V alue LIFO) Richardson Company cans a variety of vegetable-type soups

(Dolla r – V alue LIFO) 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 inven- tories does not understand how to value the inventory pools using this new method, so, as a private con- sultant, you have been asked to teach him how this new method works.

He has provided you with the following information about purchases made over a 6-year period.

_{Ending Inventory}

Date	(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

You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value.

Instructions

^{(a) Comput e th e endin g inventor y fo r Richa r dso n Compan y fo r 201 0 th r oug h 201 5 usin g dolla r -value}

^LIFO.

^{(b) Usin g you r computatio n schedule s a s you r illustration , writ e a step-by-ste p se t o f inst r uctions}

^{explainin g ho w th e calculation s a r e done . Begi n you r explanatio n b y briefl y explainin g th e theory}

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

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