Question

Novelli's Nursery has developed the following data for lower of cost or market for its products. The individual types of trees are separated as to their categories:

		Selling				Cost to
			Price		Cost		Replace
	Broad leaf trees:
	Ash		$1,800		$1,000		$800
	Beech		2,200		1,600		1,400
	Needle leaf trees:
	Cedar		$2,500		$1,750		$1,800
	Fir		3,600		3,350		3,200
	Fruit trees:
	Apple		$1,800		$1,400		$1,300
	Cherry		2,300		1,800		1,700

The costs to sell are 10% of the selling price, and the normal profit margin on all trees is 20% of the selling price.

Required: Determine the reported inventory value assuming the lower of cost or market rule is applied to individual tree products.

Answer 1

	Cost	Replacement Cost	Selling Price	Selling Exp.	Ceiling NRV	Gross Profit	Floor	Designated Market Value	Inventory Value
	a	b	c	d = c X 10%	e = c - d	f = c X 20%	h = e - f
Broad Leaf Trees:
Ash	1,000.00	800.00	1,800.00	180.00	1,620.00	360.00	1,260.00	1,260.00	1,000.00
Beech	1,600.00	1,400.00	2,200.00	220.00	1,980.00	440.00	1,540.00	1,540.00	1,540.00
Needle Leaf Trees:
Cedar	1,750.00	1,800.00	2,500.00	250.00	2,250.00	500.00	1,750.00	1,800.00	1,750.00
Fir	3,350.00	3,200.00	3,600.00	360.00	3,240.00	720.00	2,520.00	3,200.00	3,200.00
Fruit Trees:
Apple	1,400.00	1,300.00	1,800.00	180.00	1,620.00	360.00	1,260.00	1,300.00	1,300.00
Cherry	1,800.00	1,700.00	2,300.00	230.00	2,070.00	460.00	1,610.00	1,700.00	1,700.00
Total Inventory Cost									10,490.00