Problem 8-11. Vaughn Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works.

He has provided you with the following information about purchases made over a 6-year period.

Ending Inventory

Date (End-of-Year Prices) Price Index

Dec. 31, 2016 $77,300 100

Dec. 31, 2017 132,858 121

Dec. 31, 2018 129,168 138

Dec. 31, 2019 153,900 150

Dec. 31, 2020 173,880 161

Dec. 31, 2021 206,913 167

You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value.

Compute the ending inventory for Vaughn Company for 2016 through 2021 using dollar-value LIFO.

Problem 8-09. On January 1, 2020, Bonita Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Bonita continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Bonita 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.

FIFO Basis per Records

Units Unit Cost Total Cost

Inventory, 1/1/20

Product A 9,600 $30 $288,000

Product B 8,640 25 216,000

$504,000

Inventory, 12/31/20

Product A 15,840 36 $570,240

Product B 8,640 26 224,640

$794,880

Inventory, 12/31/21

Product A 12,480 40 $499,200

Product B 9,600 32 307,200

$806,400

a. Compute the internal conversion price indexes for 2020 and 2021.

b. Compute the inventory amounts at December 31, 2020 and 2021, using the dollar-value LIFO inventory method.