Question

Please show how you get to the answer and explain it! Please thoroughly show how to do this! I'm so confused.

Given the following information for Gator Company who uses the LIFO method:

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​	​	​	Net	​	NRV Minus
​	​	​	Realizable	Replacement	Normal
Item	Quantity	Cost	Value	Cost	Profit
1	1	$17.70	$24.60	$18.00	$17.10
2	1	10.80	8.28	9.30	5.58
3	1	72.00	64.80	67.20	57.60
4	1	4.80	3.12	2.88	2.64
5	1	12.00	12.30	12.60	11.10
6	1	48.00	45.60	38.40	40.80

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Required:

a.	Determine the lower of cost or market value for each inventory item for Gator Company.
b.	Determine the lower of cost or market value for Gator Company's inventory if the lower of cost or market rule is applied to the total inventory.

Answer 1

Part a
Item	Cost	Replacement cost	NRV	NRV - NP	Market	Inventory value
1	$17.70	$18.00	$24.60	$17.10	$18.00	$17.70
2	$10.80	$9.30	$8.28	$5.58	$9.30	$9.30
3	$72.00	$67.20	$64.80	$57.60	$67.20	$67.20
4	$4.80	$2.88	$3.12	$2.64	$2.88	$2.88
5	$12.00	$12.60	$12.30	$11.10	$12.60	$12.00
6	$48.00	$38.40	$45.60	$40.80	$40.80	$40.80
Market =Higher of (Replacement cost, NRV-NP)
Per unit Inventory value =Lower of(Cost, Market)
Part b
Item	Cost	Replacement cost	NRV	NRV - NP	Market	Inventory value
1	$17.70	$18.00	$24.60	$17.10
2	$10.80	$9.30	$8.28	$5.58
3	$72.00	$67.20	$64.80	$57.60
4	$4.80	$2.88	$3.12	$2.64
5	$12.00	$12.60	$12.30	$11.10
6	$48.00	$38.40	$45.60	$40.80
Total	$165.30	$148.38	$158.70	$134.82	$158.70	$158.70
In Part a it has asked us to calculate the Inventory value of each item separately and therefore we have to calculate the Market value and Cost of each item separately and the lower of those will be the Inventory value
However in Part b it has asked us to calculate the Inventory value in total and therefore we have to calculate the Total Market value and Total Cost and the lower of those will be the Inventory value