2017 ending inventory, valued at year-end costs, was $156,600 and that the relative costindex for this inventory in 2016 was 1.16.Suppose that Badger's 2018 ending inventory, valued at year-end costs, was $153,400 andthat the relative cost index for this inventory in 2018 was 1.18. What inventory balancewould Badger report on its 12/31/18 balance sheet?$130,000$131,964$153,400None of these answer choices is correct.$153,400 ÷ 1.18 = $130,000. This includes the first two layers, the first at $113,000 and thesecond at $12,600, plus another at $4,400 from 2017. No additional layers are added in 2018because the inventory in base year terms actually decreased in 2018. To get the 12/31/18balance, the three layers are multiplied by their relative price indexes of 1.00, 1.10, and 1.16,respectively.
14.Award: 5.89 out of 5.89 pointsCinnamon Buns Co. (CBC) started 2016 with $52,600 of merchandise on hand. During 2016, $297,000 in merchandise was purchased on account with credit terms of 2/10 n/30. Alldiscounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $10,100. Merchandise with an invoice amount of $2,200 was returned for credit. Cost of goods sold for the year was $310,000. CBC uses a perpetual inventory system.