In: Accounting
Lower-of-Cost-or-Market Inventory
Data on the physical inventory of Katus Products Co. as of December 31 follows:
Inventory Item |
Inventory Quantity |
Market Value per Unit (Net Realizable Value) |
||||
A54 | 37 | $ 56 | ||||
C77 | 24 | 178 | ||||
F66 | 30 | 132 | ||||
H83 | 21 | 545 | ||||
K12 | 375 | 5 | ||||
Q58 | 90 | 18 | ||||
S36 | 8 | 235 | ||||
V97 | 140 | 20 | ||||
Y88 | 17 | 744 |
Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows:
Last Purchases Invoice |
Next-to-the-Last Purchases Invoice |
||||||||||||
Inventory Item |
Quantity Purchased |
Unit Cost |
Quantity Purchased |
Unit Cost |
|||||||||
A54 | 30 | $ 60 | 40 | $ 58 | |||||||||
C77 | 25 | 174 | 15 | 180 | |||||||||
F66 | 20 | 130 | 15 | 128 | |||||||||
H83 | 6 | 547 | 15 | 540 | |||||||||
K12 | 500 | 6 | 500 | 7 | |||||||||
Q58 | 75 | 25 | 80 | 26 | |||||||||
S36 | 5 | 256 | 4 | 260 | |||||||||
V97 | 100 | 17 | 115 | 16 | |||||||||
Y88 | 10 | 750 | 8 | 740 |
Required:
Determine the inventory at cost as well as at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item:
Insert the quantity and unit cost of the last purchase.
On the following line, insert the quantity and unit cost of the next-to-the-last purchase.
Total the cost and market columns and insert the lower of the two totals in the LCM column.
The first item on the inventory sheet has been completed as an example.
Inventory Sheet December 31 |
|||||||
---|---|---|---|---|---|---|---|
Inventory Item |
Inventory Quantity |
Cost per Unit |
Market Value per Unit (Net Realizable Value) |
Total Cost | Total Market | Total LCM | |
A54 | 37 | 30 | $60 | $56 | $1,800 | $1,680 | |
7 | 58 | 56 | 406 | 392 | |||
2,206 | 2,072 | $2,072 | |||||
C77 | 24 | 178 | |||||
F66 | 30 | 132 | |||||
132 | |||||||
H83 | 21 | 545 | |||||
545 | |||||||
K12 | 375 | 5 | |||||
Q58 | 90 | 18 | |||||
18 | |||||||
S36 | 8 | 235 | |||||
235 | |||||||
V97 | 140 | 20 | |||||
20 | |||||||
Y88 | 17 | 744 | |||||
744 | |||||||
Total | $ | $ | $ |
Inventory Sheet |
|||||||
Inventory |
Inventory |
Cost per |
Market Value per Unit |
Total Cost – (C) (Units x A) |
Total Market (D) (Units x B) |
Total LCM (Lower of C and D) |
|
Item |
Quantity |
Unit (A) |
(Net Realizable Value) (B) |
||||
A54 |
37 |
30 |
$ 60.00 |
$ 56.00 |
$ 1,800.00 |
$ 1,680.00 |
|
7 |
$ 58.00 |
$ 56.00 |
$ 406.00 |
$ 392.00 |
|||
$ 2,206.00 |
$ 2,072.00 |
$ 2,072.00 |
|||||
C77 |
24 |
24 |
$ 174.00 |
$ 178.00 |
$ 4,176.00 |
$ 4,272.00 |
$ 4,176.00 |
F66 |
30 |
20 |
$ 130.00 |
$ 132.00 |
$ 2,600.00 |
$ 2,640.00 |
|
10 |
$ 128.00 |
$ 132.00 |
$ 1,280.00 |
$ 1,320.00 |
|||
$ 3,880.00 |
$ 3,960.00 |
$ 3,880.00 |
|||||
H83 |
21 |
6 |
$ 547.00 |
$ 545.00 |
$ 3,282.00 |
$ 3,270.00 |
|
15 |
$ 540.00 |
$ 545.00 |
$ 8,100.00 |
$ 8,175.00 |
|||
$ 11,382.00 |
$ 11,445.00 |
$ 11,382.00 |
|||||
K12 |
375 |
375 |
$ 6.00 |
$ 5.00 |
$ 2,250.00 |
$ 1,875.00 |
$ 1,875.00 |
Q58 |
90 |
75 |
$ 25.00 |
$ 18.00 |
$ 1,875.00 |
$ 1,350.00 |
|
15 |
$ 26.00 |
$ 18.00 |
$ 390.00 |
$ 270.00 |
|||
$ 2,265.00 |
$ 1,620.00 |
$ 1,620.00 |
|||||
S36 |
8 |
5 |
$ 256.00 |
$ 235.00 |
$ 1,280.00 |
$ 1,175.00 |
|
3 |
$ 260.00 |
$ 235.00 |
$ 780.00 |
$ 705.00 |
|||
$ 2,060.00 |
$ 1,880.00 |
$ 1,880.00 |
|||||
V97 |
140 |
100 |
$ 17.00 |
$ 20.00 |
$ 1,700.00 |
$ 2,000.00 |
|
40 |
$ 16.00 |
$ 20.00 |
$ 640.00 |
$ 800.00 |
|||
$ 2,340.00 |
$ 2,800.00 |
$ 2,340.00 |
|||||
Y88 |
17 |
10 |
$ 750.00 |
$ 744.00 |
$ 7,500.00 |
$ 7,440.00 |
|
7 |
$ 740.00 |
$ 744.00 |
$ 5,180.00 |
$ 5,208.00 |
|||
$ 12,680.00 |
$ 12,648.00 |
$ 12,648.00 |
|||||
Total |
$ 43,239.00 |
$ 42,572.00 |
$ 41,873.00 |