Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2018. Webster continues to use the FIFO method for internal decision-making purposes. Webster's FIFO inventories at December 31, 2018, 2019, and 2020, 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:
2018 ......................... 1.00
2019......................... 1.25
2020......................... 1.50
Required:
1. Determine Webster's dollar-value LIFO inventory at December 31, 2019 and 2020.
2. Describe how the change should have been reported in Webster's 2018 financial statements.