In: Accounting
Forester Company has five products in its inventory. Information
about the December 31, 2021, inventory follows.
Product | Quantity | Unit Cost |
Unit Replacement Cost |
Unit Selling Price |
|||||||||||||
A | 500 | $ | 18 | $ | 20 | $ | 24 | ||||||||||
B | 800 | 23 | 19 | 26 | |||||||||||||
C | 700 | 11 | 10 | 16 | |||||||||||||
D | 800 | 15 | 12 | 14 | |||||||||||||
E | 700 | 22 | 20 | 21 | |||||||||||||
The cost to sell for each product consists of a 10 percent sales
commission. The normal profit for each product is 40 percent of the
selling price.
Required:
1. Determine the carrying value of inventory at
December 31, 2021, assuming the lower of cost or market (LCM) rule
is applied to individual products.
2. Determine the carrying value of inventory at
December 31, 2021, assuming the LCM rule is applied to the entire
inventory.
3. Assuming inventory write-downs are common for
Forester, record any necessary year-end adjusting entry based on
the amount calculated in requirement 2.
Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products. (Do not round intermediate calculations.)
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Determine the carrying value of inventory at December 31, 2021, assuming the LCM rule is applied to the entire inventory. (Do not round intermediate calculations.)
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