Information for a firm using the dollar value (DV) LIFO retail method follows. The cost to retail (C/R) is provided along with price level indices. The data reflects the use of the method through year one.

 Information for a firm using the dollar value (DV) LIFO retail method follows. The cost to retail (C/R) is provided along with price level indices. The data reflects the use of the method through year one.

Retail    Retail    DV LIFO
Layer    Base    Index    Current    C/R    Cost
Base    $200    1.00    $200    .40    $80
year one    80    1.10    88    .34    $30
For year two, ending inventory at retail (by count) totaled $450. The ending price-level index for the year was 1.15. The cost-to-retail ratio was .42. What is the ending inventory for financial reporting purposes for this firm?

$164
$54
$189
$177

Answer

164

 You Answered Correctly!
The DV LIFO retail process applies the DV LIFO method to retail dollars, and then deflates the retail layer added, now reflecting current prices, to cost, using the cost-to-retail ratio. The calculations are:

Ending inventory, retail, at base = $450(1.00/1.15) = $391

Increase in retail, current = $111(1.15/1.00) = $128

Increase in cost = $128(.42) = $54

Ending inventory at cost = ($80 + $30) + $54 = $164