Question

Score: U UI 5 PLS 33 Of 33 (28 complete) S6-5 (similar to) It is December 31, the end of the year, and the controller of Saxton Corporation is applying the lower-of-cost-or-market (LCM) rule to inventories. Before any year-end adjustments, Saxton reports the following data: Cost of goods sold ............ ..........$ 440,000 Historical cost of ending inventory, as determined by a physical count ............. 58,000 Saxton determines that the current replacement cost of ending inventory is $47,000. Show what Saxton should report for ending inventory and for cost of goods sold. Identify the financial statement where each item appears. Inventory will be reported on the at $0

Answer 1

Answer. CO00 i Calulation of Enging Inventory aut new cost of goods sold _using-prinuple of_lower_of_coit or moket police Menswemega_of_Inventories - As per the accounting Standards, inventovies should be valued I at lower of cost and market price market price is the - estimated selling price of the inventory such lower of cost lor market price of inuentory is based on the principle of ceases - Conservatism Principle says no asset should sh valued more at from their estimated selling poice Τομερένα In the question, it given that, Historical rest of Ending Inventory $ 58000 Replacemeali costi (mawket pulie) of Ending Inventory $ 3 . Market price of Inventory is lower than the historical Cost of the ending inventory As explained above, inventory should be valued at lower of cost or market price, inventory should be valued at $ 47000 which is lower from historical cost 7000 - Inventory will be reported on the replaceme! cost at $47000 New Cost of Goods soll Cost of Goods sold is the total amount goods that are quailable for sale New cost of Goods soll : Old Guit of Goods sold I Change in Enl. Inventon __$$_440000 + (58000 - 47000) New Cost of goods sold $450000