Reference no: EM13874472

Richardson company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who acounts 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.provided you with the following information about purchases made over a 6-year period.

	Ending Inventory
Date	(End-of-Year Prices)	Price Index
Dec, 31,2010	$80,000	100
Dec. 31, 2011	111,300	105
Dec. 31, 2012	108,000	120
Dec. 31, 2013	128,700	130
Dec. 31, 2014	147,000	140
Dec. 31, 2015	174,000	145

Explain how these calculations are done and why needs to put all inventories at a base-year value.

Instructions:

a. Compute the ending inventory for Richardson Company for 2010 through 2015 using dollar -value LIFO.

b. Using your computation schedules as your illustration, write a step-by-step set of instructions explaining how the calculations are done.Begin your explanation by briefly explaining the theory behind this inventory method, including the purpose of putting all amounts into base - period levels.