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In: Accounting
Affliction Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The...
- Affliction Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Using the lower-of-cost-or-market rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2014, for each of the inventory items below.
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Expert Solution
| Item D | Item E | Item F | Item G | Item H | Item I | ||||
| Estimated selling price | 130 | 98 | 95 | 85 | 105 | 80 | |||
| Cost | 100 | 80 | 60 | 80 | 65 | 42 | |||
| Replacement cost | 110 | 65 | 70 | 50 | 70 | 40 | |||
| Estimated selling expense | 25 | 25 | 20 | 20 | 25 | 25 | |||
| Normal profit | 30 | 18 | 25 | 27 | 22 | 20 | |||
| NRV (Selling Price - Selling Expense) | 105 | 73 | 75 | 65 | 80 | 55 | |||
| NRV - Normal profit | 75 | 55 | 50 | 38 | 58 | 35 | |||
| MARKET | 105 | 65 | 70 | 50 | 70 | 40 | |||
| LOWER OF COST OR MARKET | 100 | 65 | 60 | 50 | 65 | 40 | |||
| Note : Market price is same as replacement cost, but if replacement cost is more than NRV then NRV will be the market value(as in Item D), Also market price should not be less then NRV-NP. | |||||||||
ekkarill92 answered 2 years agoRelated Solutions
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Cost to Replace
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Cost of Completion and Disposal
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