In: Accounting
1. 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 9.
Inventory |
Inventory |
Cost per |
Market Value per Unit |
|
Birch | 43 | $244 | $231 | |
Cypress | 15 | 68 | 58 | |
Mountain Ash | 37 | 230 | 245 | |
Spruce | 49 | 151 | 170 | |
Willow | 43 | 113 | 111 |
Inventory at the Lower of Cost or Market | |||
Inventory Item | Total Cost | Total Market | Total Lower of C or M |
Birch | $ | $ | $ |
Cypress | |||
Mountain Ash | |||
Spruce | |||
Willow | |||
Total | $ | $ | $ |
2. Perpetual Inventory Using FIFO
Beginning inventory, purchases, and sales data for portable DVD players are as follows:
Apr. 1 | Inventory | 37 units @ $74 | |
10 | Sale | 28 units | |
15 | Purchase | 19 units @ $77 | |
20 | Sale | 13 units | |
24 | Sale | 11 units | |
30 | Purchase | 22 units @ $81 |
The business maintains a perpetual inventory system, costing by the first-in, first-out method.
Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3.
a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.
Cost of the Merchandise Sold Schedule | |||||||||
First-in, First-out Method | |||||||||
Portable DVD Players | |||||||||
Date | Quantity Purchased | Purchases Unit Cost | Purchases Total Cost | Quantity Cost of Merchandise Sold | Cost of Merchandise Sold Unit Cost | Cost of Merchandise Sold Total Cost | Inventory Quantity | Inventory Unit Cost | Inventory Total Cost |
Apr. 1 | $ | $ | |||||||
Apr. 10 | $ | $ | |||||||
Apr. 15 | $ | $ | |||||||
Apr. 20 | |||||||||
Apr. 24 | |||||||||
Apr. 30 | |||||||||
Apr. 30 | Balances | $ | $ |
b. Based upon the preceding data, would you
expect the inventory to be higher or lower using the last-in,
first-out method?
1 | Inventory Item | Total Cost | Total Market | Total Lower of C or M | ||||||
Birch | $10,492 | $9,933 | $9,933 | |||||||
Cypress | $1,020 | $870 | $870 | |||||||
Mountain Ash | $8,510 | $9,065 | $8,510 | |||||||
Spruce | $7,399 | $8,330 | $7,399 | |||||||
Willow | $4,859 | $4,773 | $4,773 | |||||||
Total | $32,280 | $32,971 | $31,485 | |||||||
2 a. | FIFO - | |||||||||
Purchases | Cost of Merchandise Sold | Inventory Balance | ||||||||
Quantity | Unit Cost | Total Cost | Quantity | Unit Cost | Total Cost | Quantity | Unit Cost | Total Cost | ||
Beginning Inventory - Apr 1 | - | 37 | $74 | $2,738 | ||||||
Sale - Apr 10 | 28 | $74 | $2,072 | 9 | $74 | $666 | ||||
Purchase - Apr 15 | 19 | $77 | $1,463 | 9 | $74 | $666 | ||||
19 | $77 | $1,463 | ||||||||
Sale - Apr 20 | 9 | $74 | $666 | - | - | - | ||||
4 | $77 | $308 | 15 | $77 | $1,155 | |||||
Sale - Apr 24 | 11 | $77 | $847 | 4 | $77 | $308 | ||||
Purchase - Apr 30 | 22 | $81 | $1,782 | 4 | $77 | $308 | ||||
22 | $81 | $1,782 | ||||||||
41 | $3,245 | 52 | $3,893 | 26 | $2,090 | |||||
2 b. | lower |