Internal Indexes?Dollar-Value LIFO On January 1, 2010, 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.

(a) Prepare a schedule to compute the internal conversion price indexes for 2010 and 2011. Round indexes to two decimal places

(b) Prepare a schedule to compute the inventory amounts at December 31, 2010 and 2011, using the dollar-value LIFO inventory method.

(AICPA adapted)

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FIFO Basis per Records Unit Total Cost Units Cost Inventory, 1/1/10 Product A Product B $30 $300,000 10,000 9,000 25 225.000 $525,000 Inventory, 12/31/10 Product A $612,000 17,000 36 Product B 9,000 26 234,000 $846,000 Inventory, 12/31/11 40 $520,000 Product A 13,000 Product B 10,000 32 320,000 $840,000