Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax

Question:

Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2024. Webster continues to use the FIFO method for internal decision-making purposes. Webster’s FIFO inventories at December 31, 2024, 2025, and 2026, were $300,000, $412,500, and $585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollar- value LIFO amounts. Webster estimated these indexes as follows:

Required:
1. Determine Webster’s dollar-value LIFO inventory at December 31, 2025 and 2026.
2. Will Webster account for the change (a) retrospectively or (b) prospectively?

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