Midori Company had ending inventory at end-of-year prices of $138,500 at December 31, 2013; $165,771 at December 31, 2014; and $181,366 at December 31, 2015. The year-end price indexes were 100 at 12/31/13, 113 at 12/31/14, and 118 at 12/31/15. Compute the ending inventory for Midori Company for 2013 through 2015 using the dollar-value LIFO method. 2013 2014 2015 Ending Inventory $ 138,500 $ 147,766 $156,026 Brief Exercise 8-9 Your answer is correct. Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow. Year Ended December 31 Inventory at Current-Year Cost Price Index 2013 $20,000 100 2014 22,363 107 2015 26,656 112 Compute the value of the 2014 and 2015 inventories using the dollar-value LIFO method. 2014 2015 Inventory under LIFO $ 20,963 $ 24,211 Ann M. Martin Company makes the following errors during the current year. (In all cases, assume ending inventory in the following year is correctly stated.) 1. Ending inventory is overstated, but purchases and related accounts payable are recorded correctly. 2. Both ending inventory and purchases and related accounts payable are understated. (Assume this purchase was recorded and paid for in the following year.) 3. Ending inventory is correct, but a purchase on account was not recorded. (Assume this purchase was recorded and paid for in the following year.) Indicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the subsequent year. Current Year Subsequent Year 1. Working capital Overstated No effect Current ratio Overstated No effect Retained earnings Overstated No effect Net income Overstated Understated 2. Working capital No effect No effect Current ratio Overstated No effect Retained earnings No effect No effect Net income No effect No effect 3. Working capital Overstated No effect Current ratio Overstated No effect Retained earnings Overstated No effect Net income Overstated Understated and other questions
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