On December 31, 2019, the inventory of Powhattan Company amounts to $800,000. During 2020, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2020, the inventory is $1,053,000 at December 31, 2020, prices. Using the December 31, 2019, price level of 100 and the December 31, 2020, price level of 108, compute the inventory value at December 31, 2020, under the dollar-value LIFO method.

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A: a.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.