Question

Shamrock Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2020. Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit A 1,600 $7.88 $8.82 $11.03 $1.58 $1.89 B 1,300 8.61 8.30 9.87 0.95 1.26 C 1,500 5.88 5.67 7.56 1.21 0.63 D 1,500 3.99 4.41 6.62 0.84 1.58 E 1,900 6.72 6.62 7.04 0.74 1.05 Greg Forda is an accounting clerk in the accounting department of Shamrock Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.

(a) Your answer is partially correct. Try again. Calculate the lower-of-cost-or-market using the individual-item approach. Lower-of-Cost-or-Market (Per unit basis) Item A $ Item B $ Item C $ Item D $ Item E $ Click if you would like to Show Work for this question: Open Show Work

Show the journal entry he will need to make in order to write down the ending inventory from cost to market. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
Cost of Goods sold Method:
The Loss method:

Answer 1

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Shamrock	A	B	C=A*B	D	E	F	G=E-F	H= Lower of D or G	H= Lower of D or E	I= Lower of H or C
Inventory item	Number of units	Cost per unit	Total cost	Replacement cost per unit	Sell Price per Unit	Completion & Disposal Cost/Unit	NRV* per unit	Market value per unit	Market value	LCNRV**
A	1,600.00	7.88	12,608.00	8.82	11.03	1.58	9.45	8.82	14,112.00	12,608.00
B	1,300.00	8.61	11,193.00	8.30	9.87	0.95	8.92	8.30	10,790.00	10,790.00
C	1,500.00	5.88	8,820.00	5.67	7.56	1.21	6.35	5.67	8,505.00	8,505.00
D	1,500.00	3.99	5,985.00	4.41	6.62	0.84	5.78	4.41	6,615.00	5,985.00
E	1,900.00	6.72	12,768.00	6.62	7.04	0.74	6.30	6.30	11,970.00	11,970.00
Ending Inventory			51,374.00							49,858.00
Reduction in value			1,516.00
Year end entry- Cost of Goods sold Method
Account	Debit $	Credit $
Cost of Goods sold Method	1,516.00
Inventory		1,516.00
Year end entry- The Loss Method
Loss on valuation of inventory	1,516.00
Inventory		1,516.00