Question

Problem 9-5 Culver 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, 2017. Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit A 1,300 $7.65 $8.57 $10.71 $1.53 $1.84 B 1,000 8.36 8.06 9.59 0.92 1.22 C 1,200 5.71 5.51 7.34 1.17 0.61 D 1,200 3.88 4.28 6.43 0.82 1.53 E 1,600 6.53 6.43 6.83 0.71 1.02 Greg Forda is an accounting clerk in the accounting department of Culver 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.

Your answer is incorrect. 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 $ SHOW LIST OF ACCOUNTS LINK TO TEXT

Your answer is partially correct. Try again. 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: Click if you would like to Show Work for this question: Open Show Work

Answer 1

	Given	Given	Given	Given	Compute	Given	Compute	Greater of Replacement or Floor
Item	Quantity	Replacement Cost/Unit	Estimated Selling Price/Unit	Completion & Disposal Cost/Unit	Net Realizable Value (ceiling)	Normal Profit Margin/Unit	Net Realizable Value less a Normal Profit (Floor)	Designated Market	Unit Cost	Lower-of- Cost-or- Market per unit basis
A	1,300	$                8.57	$           10.71	$         1.53	$                     9.18	$         1.84	$                 7.34	$                          8.57	$         7.65	$                  7.65
B	1,000	$                8.06	$             9.59	$         0.92	$                     8.67	$         1.22	$                 7.45	$                          8.06	$         8.36	$                  8.06
C	1,200	$                5.51	$             7.34	$         1.17	$                     6.17	$         0.61	$                 5.56	$                          5.56	$         5.71	$                  5.56
D	1,200	$                4.28	$             6.43	$         0.82	$                     5.61	$         1.53	$                 4.08	$                          4.28	$         3.88	$                  3.88
E	1,600	$                6.43	$             6.83	$         0.71	$                     6.12	$         1.02	$                 5.10	$                          6.43	$         6.53	$                  6.43
Calculate the lower-of-cost-or-market using the individual-item approach.
	A	B	C = A x B	D	E = A x D
	Quantity	Unit Cost	Cost	Lower-of- Cost-or- Market	Lower-of-Cost-or-Market (per item basis)	Difference
Item A	1,300	$                7.65	$      9,945.00	$         7.65	$              9,945.00	$            -
Item B	1,000	$                8.36	$      8,360.00	$         8.06	$              8,060.00	$     300.00
Item C	1,200	$                5.71	$      6,852.00	$         5.56	$              6,672.00	$     180.00
Item D	1,200	$                3.88	$      4,656.00	$         3.88	$              4,656.00	$            -
Item E	1,600	$                6.53	$    10,448.00	$         6.43	$            10,288.00	$     160.00
Total						$     480.00
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
Cost of Goods sold Method:
	Cost of Goods Sold	$            480.00
	Allowance to Reduce Inventory to Market		$         480.00
The Loss method:
	Loss Due to Market Decline of Inventory	$            480.00
	Allowance to Reduce Inventory to Market		$         480.00