Dollar Value LIFO

Question 1

What are the advantages of Dollar Valued (DV) Last In First Out (LIFO)?

Answer 1

1. )Reduces the effect of the liquidation;takes FIFO inventory and converts to LIFO
2. )Allows companies to use FIFO internally;
3. )Reduces clerical costs.

Question 2

Why would an entity utilize Dollar Valued (DV) Last In First Out (LIFO)?

Answer 2

Reduces the effect of the LIFO liquidation

Question 3

List the steps in applying Dollar Valued (DV) Last In First Out (LIFO)

Answer 3

1. )DV LIFO is applied to inventory at retail;
2. )FIFO retail method cost/retail ratio is applied to retail layer;
3. )Cost layer is added to beginning inventory at DV LIFO cost.

Question 4

What is the Dollar Valued (DV) Last In First Out (LIFO) conversion index formula?

Answer 4

Ending Inventory in Current Year Dollars/Ending Inventory in Base-Year dollars

Question 5

Define “base-year dollars” as it is used in the DV LIFO Index formula

Answer 5

Price level for the pool at the beginning of the year Dollar Valued (DV) Last In First Out (LIFO) adopted

Question 6

What is the objective of the DV LIFO Method?

Answer 6

Conversion of the FIFO ending inventory to LIFO ending inventory for financial statement reporting purposes

Question 7

How does the double-extension method affect ending inventory?

Answer 7

The ending inventory is extended at both base year cost and ending current year cost

Question 8

Which inventory method requires estimates of price level changes for specific inventories?

Answer 8

DV LIFO