Question

Serial Problem Business Solutions LO P2, A3

Part A
Santana Rey of Business Solutions is evaluating her inventory to determine whether it must be adjusted based on lower of cost or market rules. Business Solutions has three different types of software in its inventory, and the following information is available for each.

		Per Unit
Inventory Items	Units	Cost			Market
Office productivity	6	$	86		$	84
Desktop publishing	5		114			110
Accounting	6		100			106

Required:
1. & 2. Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or market rule to inventory as a whole and and lower of cost or market rule to each product in inventory. Must Rey adjust the reported inventory value?

Part B
Selected accounts and balances for the three months ended March 31, 2018, for Business Solutions follow.

January 1 beginning inventory	$	0
Cost of goods sold		42,150
March 31 ending inventory		1,686

Compute inventory turnover and days’ sales in inventory for the three months ended March 31, 2018.

Answer 1

	Answer = 1)
	CALCULATION OF INVENTORY VALUE ON THE BASIS OF LOWER OF COST OR MARKET VALUE
	Inventory Items	Unit	Cost	Market Value	Cost Vallue (Unit X Cost)	Market Value (Unit X Market Value)	Cost or market value whichever is less
	Office Productivity	6	$                          86	$                     84	$                    516	$                        504	$                          504
	Desktop Publising	5	$                       114	$                   110	$                    570	$                        550	$                          550
	Accounting	6	$                       100	$                   106	$                    600	$                        636	$                          600
			TOTAL		$                1,686	$                     1,690	$                       1,654
	Answer = 2)
	Yes , Rey adjust the reported inventory value,
	Answer = Part B
	Answer =1)
	Inventory turnover Ratio = Cost of Goods Sold / Average Inventory
	Inventory turnover Ratio =
	Opening inventory	0
	Closing inventory	1686
	Average inventory=	843
		($ 1686 /2)
	Inventory turnover Ratio =
	COGS	$                  42,150
	Divide By =	"/" By
	Average inventory=	843
	Inventory turnover Ratio = (Times)	50.00
	Answer = 2	2017
	Days in inventory = (Ending inventory / COGS ) X 365
	Ending inventory =	1686
	Divide By =	"/" By
	COGS	$                  42,150
	Equal to =	0.04
	Multiply By 365	"X "By 365
	Days in inventory =	14.60