Question

Forester Company has five products in its inventory. Information about the December 31, 2021, inventory follows.

Product		Quantity		Unit Cost				Unit Replacement Cost				Unit Selling Price
A		800		$	13			$	15			$	19
B		600			18				14				21
C		500			6				5				11
D		900			10				7				9
E		600			17				15				16

The cost to sell for each product consists of a 20 percent sales commission. The normal profit for each product is 30 percent of the selling price.

Required:
1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products.

Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products. (Do not round intermediate calculations.)

	Product (units) RC NRV NRV-NP Market Cost Inventory carrying value A (800) $12,000 B (600) 8,400 C (500) 2,500 D (900) 6,300 E (600) 9,000 Total $0 $0 $0

Answer 1

Solution:
CALCULATION OF INVENTORY VALUE AS PER LOWER OF COST OR NET REALIZABLE VALUE
PRODUCT	Quantity (A)	Purchase Cost Per Unit	Net Realizable Value	Cost of Ivnentory lower of Cost or Net Realizable Value (B)	Inventory Carrying Value (AXB)
A	800	$                 13.00	$                        15.00	$                              13.00	$          10,400
B	600	$                 18.00	$                        14.00	$                              14.00	$            8,400
C	500	$                   6.00	$                           5.00	$                                5.00	$            2,500
D	900	$                 10.00	$                           7.00	$                                7.00	$            6,300
E	600	$                 17.00	$                        15.00	$                              15.00	$            9,000
		Total			$          36,600