Question

Lower-of-Cost-or-Market Inventory

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Assemble the data in the form illustrated in Exhibit 10.

Product	Inventory Quantity	Cost Per Unit	Market Value per Unit (Net Realizable Value)
Class 1:
Model A	300	$140	$125
Model B	500	90	112
Model C	150	60	59
Class 2:
Model D	800	120	115
Model E	400	140	145

a. Determine the value of the inventory at the lower of cost or market applied to each item in the inventory.

Inventory at the Lower of Cost or Market
Product	Inventory Quantity	Cost per Unit	Market Value per Unit (Net Realizable Value)	Cost	Market	Lower of Cost or Market
Model A		$	$	$	$	$
Model B
Model C
Model D
Model E
Total				$	$	$

b. Determine the value of the inventory at the lower of cost or market applied to each class of inventory.

Inventory at the Lower of Cost or Market
Product	Inventory Quantity	Cost per Unit	Market Value per Unit (Net Realizable Value)	Cost	Market	Lower of Cost or Market
Class 1:
Model A		$	$	$	$
Model B
Model C
Subtotal				$	$	$
Class 2:
Model D				$	$
Model E
Subtotal				$	$
Total				$	$	$

c. Determine the value of the inventory at the lower of cost or market applied to total inventory.

Inventory at the Lower of Cost or Market
Product	Inventory Quantity	Costper Unit	Market Value per Unit (Net Realizable Value)	Cost	Market	Lower of Cost or Market
Model A		$	$	$	$
Model B
Model C
Model D
Model E
Total				$	$	$

Answer 1

Part-1 Inventory at the Lower of Cost or Market
Product			Market Value	Cost (D=AXB)	Market (E=BXC)	Lower of Cost or Market Lower of ( E) or (D)
	Inventory (A)	Cost (B)	per Unit ©
	Quantity	per Unit	(Net Realizable Value)
Model A	300	$140.00	$125.00	$42,000.00	$37,500.00	$37,500.00
Model B	500	$90.00	$112.00	$45,000.00	$56,000.00	$45,000.00
Model C	150	$60.00	$59.00	$9,000.00	$8,850.00	$8,850.00
Model D	800	$120.00	$115.00	$96,000.00	$92,000.00	$92,000.00
Model E	400	$140.00	$145.00	$56,000.00	$58,000.00	$56,000.00
Total				$248,000.00	$252,350.00	$239,350.00
Part-2 Inventory at the Lower of Cost or Market
Product			Market Value	Cost (D=AXB)	Market (E=BXC)	Lower of Cost or Market Lower of ( E) or (D)
	Inventory (A)	Cost (B)	per Unit ©
	Quantity	per Unit	(Net Realizable Value)
Class I
Model A	300	$140.00	$125.00	$42,000.00	$37,500.00
Model B	500	$90.00	$112.00	$45,000.00	$56,000.00
Model C	150	$60.00	$59.00	$9,000.00	$8,850.00
Subtotal				$96,000.00	$102,350.00	$96,000.00
Class 2
Model D	800	$120.00	$115.00	$96,000.00	$92,000.00
Model E	400	$140.00	$145.00	$56,000.00	$58,000.00
Subtotal				$152,000.00	$150,000.00	$150,000.00
Total				$248,000.00	$252,350.00	$246,000.00
Part-3 Inventory at the Lower of Cost or Market
Product			Market Value	Cost (D=AXB)	Market (E=BXC)	Lower of Cost or Market Lower of ( E) or (D)
	Inventory (A)	Cost (B)	per Unit ©
	Quantity	per Unit	(Net Realizable Value)
Model A	300	$140.00	$125.00	$42,000.00	$37,500.00
Model B	500	$90.00	$112.00	$45,000.00	$56,000.00
Model C	150	$60.00	$59.00	$9,000.00	$8,850.00
Model D	800	$120.00	$115.00	$96,000.00	$92,000.00
Model E	400	$140.00	$145.00	$56,000.00	$58,000.00
Total				$248,000.00	$252,350.00	$248,000.00