Dollar Value LIFO Method

Conversion price index = Ending inventory at end-of year prices/Ending inventory at abase-year prices

X = Year 3 ending dollar-value LIFO inventory

Year 1, cost index of 120, Layer in base-year dollars 4,000

Year 2, cost index of 140, Layer in base-year dollars 2,000

Year 3, cost index of 150, Layer in base-year dollars??, at current cost ending inventory 24,000

Year 3, ending inventory at base year cost:

24,000 / 1.5 = 16,000

Year 3 layer:

16,000 - 4,000 - 2,000 = 10,000

X:

10,000 * 1.5 = 10,500

4,000 * 1.2 =4800

2000 * 1.4 = 2800

TOTAL = 18100

Mistakes

1)

X = amount of liabilities

Bonds payable---100,000

Discount on bonds payable---400

X = 99,600

2)

X = loss on redemption

Bonds at par---1,000,000

issued at 97

Due in 10 yrs

bond issue costs---50,000

Called at 104

5 yrs

Dr. Bonds payable--1,000,000

---Cr. Cash 1,040,000

---Cr. Discount on bonds payable--15,000

---Cr. Unamortized bond issue costs--25,000

Dr. Loss on early extinguishment--1,080,000

3)

On Oct 1, 2001, A Co. approved a plan to dispose of division's assets next year

estimated FV of the assets was 2,000 less than the carrying value

estimated operating losss of 10,000 for the period Jan 1 to Dec 31, 2001

X = loss from discontinued operations in 2001

122,000

including Jan to Sep operating losses and impairment loss

4)

12,000 in a saving account

semiannual compound interest

5 yrs later

the balance will be 19547

X = annual rate of interest

FV of 1, 10yrs

3%=1.344

5%=1.629

10%

5%*2 (semiannual!)

5)

X = total interest revenue

purchased 10,000, 8%, 6yrs note

6 equal annual payments of 5,000

9% yield rate

PV = 19000

X = 11000

Self constructed assets

Capitalization of interest during construction

-Assets under construction for an enterprise's own use

-Assets for sale or lease that are constructed as discrete project

lower of actual interest or avaidable interest

Avoidable interest

Average accumulated expenditures during construction * interest rate

When specific borrowings is greater than average accumulated expenditures, use the interest rate of specific borrowings

When average accumulated expenditures is greater than specific borrowings, use specific borrowing interest rate and weighted average of interest rate of other debt.