Question

Lower-of-Cost-or-Market Inventory

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Assemble the data in the form illustrated in Exhibit 10.

Product	Inventory Quantity	Cost Per Unit	Market Value per Unit (Net Realizable Value)
Class 1:
Model A	10	$164	$144
Model B	20	253	269
Model C	47	48	33
Class 2:
Model D	26	48	37
Model E	35	49	37

a. Determine the value of the inventory at the lower of cost or market applied to each item in the inventory.

Inventory at the Lower of Cost or Market
Product	Inventory Quantity	Cost per Unit	Market Value per Unit (Net Realizable Value)	Cost	Market	Lower of Cost or Market
Model A		$	$	$	$	$
Model B
Model C
Model D
Model E
Total				$	$	$

b. Determine the value of the inventory at the lower of cost or market applied to each class of inventory.

Inventory at the Lower of Cost or Market
Product	Inventory Quantity	Cost per Unit	Market Value per Unit (Net Realizable Value)	Cost	Market	Lower of Cost or Market
Class 1:
Model A		$	$	$	$
Model B
Model C
Subtotal				$	$	$
Class 2:
Model D				$	$
Model E
Subtotal				$	$
Total				$	$	$

c. Determine the value of the inventory at the lower of cost or market applied to total inventory.

Inventory at the Lower of Cost or Market
Product	Inventory Quantity	Cost per Unit	Market Value per Unit (Net Realizable Value)	Cost	Market	Lower of Cost or Market
Model A		$	$	$	$
Model B
Model C
Model D
Model E
Total

Answer 1

SOLUTION a:
Inventory at lower of cost or market
Product	Quantity	Cost per unit	market value per unit	Cost	Market	Lower ofcost or market
Model A	10	$164	$144	$1,640	$1,440	$1,440
Model B	20	$253	$269	$5,060	$5,380	$5,060
Model C	47	$48	$33	$2,256	$1,551	$1,551
Model D	26	$48	$37	$1,248	$962	$962
Model E	35	$49	$37	$1,715	$1,295	$1,295
Total				$11,919	$10,628	$10,308

SOLUTION b:
Inventory at lower of cost or market
Product	Quantity	Cost per unit	market value per unit	Cost	Market	Lower ofcost or market
Class 1:
Model A	10	$164	$144	$1,640	$1,440
Model B	20	$253	$269	$5,060	$5,380
Model C	47	$48	$33	$2,256	$1,551
Subtotal				$8,956	$8,371	$8,371
Class 2:
Model D	26	$48	$37	$1,248	$962
Model E	35	$49	$37	$1,715	$1,295
Subtotal				$2,963	$2,257	$2,257
Total				$11,919	$10,628	$10,628

SOLUTION c:
Inventory at lower of cost or market
Product	Quantity	Cost per unit	market value per unit	Cost	Market	Lower ofcost or market
Model A	10	$164	$144	$1,640	$1,440
Model B	20	$253	$269	$5,060	$5,380
Model C	47	$48	$33	$2,256	$1,551
Model D	26	$48	$37	$1,248	$962
Model E	35	$49	$37	$1,715	$1,295
Total				$11,919	$10,628	$10,628