On January 1, 2025, 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.

Instructions

a. Prepare a schedule to compute the internal conversion price indexes for 2025 and 2026. Round indexes to two decimal places.

b. Prepare a schedule to compute the inventory amounts at December 31, 2025 and 2026, using the dollar-value LIFO inventory method.

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Inventory, 1/1/25 Product A Product B Inventory, 12/31/25 Product A Product B Inventory, 12/31/26 Product A Product B Units 10,000 9,000 17,000 9,000 13,000 10,000 FIFO Basis per Records Unit Cost $30 25 36 26 40 32 Total Cost $300,000 225,000 $525,000 $612,000 234,000 $846,000 $520,000 320,000 $840,000