Question

In: Accounting

1. Lower-of-Cost-or-Market Inventory On the basis of the following data, determine the value of the inventory...

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
Item

Inventory
Quantity

Cost per
Unit

Market Value per Unit
(Net Realizable Value)

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?

Solutions

Expert Solution

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

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