Practice prompt · Q:inventory-ownership-cost-flow-and-measurement/dollar-value-lifo-mechanics-001

Say what a dollar-value layer measures

Tests whether the learner separates a real increase in quantity from a price increase when applying a price index.

Updated Sep 11, 2026 Review due Dec 11, 2026

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Dollar-value last-in first-out pools inventory by dollars rather than by units. That structure reduces liquidations caused only by changes in product mix. The index separates the price effect from the base-year quantity comparison. ASC 330-10-30-9 identifies LIFO as a cost-flow assumption. It does not approve a particular pool or index.

Choose the best answer. a Ending inventory is restated to base-year prices first, so that a new layer is added only when the quantity of goods actually grew. b Ending inventory at current prices is compared with the prior year at current prices, and any increase becomes a new layer. c Each layer is carried at base-year cost permanently, with no index applied afterward. d The index converts the pools into first-in first-out amounts for reporting.

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Answer: a

Choice a. Convert to base-year cost, compare the quantity represented by that amount, then price a new layer with the index from the year it arose.