On January 1, 2024, a company adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below: Year-End 2024 2025 2026 Ending Inventory at Year-End Costs $ 126,000 143,000 153,600 Cost Index 1.05 1.10 1.20 What inventory balance should the company report on its 12/31/2024 balance sheet?

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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.