Question

Residential Pumps
Inventory at Feb. 28:	238	$ 476	$ 113,228
Purchases:
March 10	595	$ 536	$ 318920
March 20	476	$ 565	$ 268940
March 30	357	$ 595	$ 212415
Sales
March 15	595	$ 643	$ 382585
March 25	476	$ 678	$ 322728
Inventory at March 31:	595
Commercial Pumps
Inventory at Feb. 28:	714	$ 952	$ 679728
Purchases
March 3	714	$ 1071	$ 764694
March 12	357	$ 1131	$ 403767
March 21	595	$ 1190	$ 708050
Sales
March 18	1071	$ 1285	$ 1376235
March 29	714	$ 1357	$ 968,898
Inventory at March 31	595

In addition to the above information, due to a downturn in the economy that has hit Waterway’s commercial customers especially hard, Waterway expects commercial pump prices from March 31 onward to be considerably different (and lower) than at the beginning of and during March. Waterway has developed the following additional information.

		Commercial Pumps		Residential Pumps
Net realizable value (per unit)		$1,071		$690

The normal profit margin is 16.67% of cost. Waterway uses the FIFO accounting method.

Determine the dollar amount that Waterway should report on its March 31 balance sheet for inventory. Assume Waterway applies lower-of-cost-or-net realizable value at the individual product level.

Total amount of inventory

$

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Determine the dollar amount that Waterway should report on its March 31 balance sheet for inventory. Assume Waterway applies lower-of-cost-or-market at the major category level. Waterway places both commercial and residential pumps into the same (and only) category.

Total amount of inventory

$

Answer 1

В С Н 1 2 FIFO Method FIFO Method Commercial pumps Residential Pumps Units Rate per Unit 4 Units Rate per Unit 476.00$ Amount Amount 238 $ 952.00 $6,79,728.00 714 $1,071.00 $7,64,694.00 1,131.00 $4,03,767.00 714 $ Inventory at Feb 28 Inventory at Feb 28 5 1,13,288.00 595$ 536.00$ Purchases - Mar 10 Purchases - Mar 3 6 3,18,920.00 Sales on Mar 15: First 238 from beginning Invenory 357 $ Purchases - Mar 12 7 476.00 $ Sales -Mar 18: First 714 from beginning Invenory 238 $ 1,13,288.00 357 $ $ 536.00 $ 565.00 $ 714 $ 952.00 $ 6,79,728.00 Next 357 Units from Mar 10 Purchases 536.00 9 1,91,352.00 357$1,071.00 $3,82,347.00 238 $ 476 $ Balance on Mar 15 Next 357 Units from Mar 3 Purchases 10 1,27,568.00 Purchases - Mar 20 Balance as Mar 18 11 2,68,940.00 Sales on Mar 25: First 238 Units from Mar 10 purchases Purchases Mar 3 357$ 1,071.00 $3,82,347.00 357 $ 595 $ 12 238 $ 238 $ 238 $ 357 $ 536.00$ 565.00 $ 565.00 $ 595.00 $ $ 1,131.00 $4,03,767.00 1,190.00 $7,08,050.00 1,27,568.00 Purchases Mar 12 13 1,34,470.00 Purchases - Mar 21 14 Next 238 Units from Mar 2O Purchases Balance on Mar 25 Sales on Mar 29: 15 1,34,470.00 357$1,071.00 $3,82,347.00 357 $ 1,131.00 $4,03,767.00 Purchases Mar 30 Ending Balance 2,12,415.00 From Purchases - Mar 3 16 From Purchases - Mar 12 17 595 3,46,885.00 Ending Balance 595 $ 1,190.00 $7,08,050.00 18 19 Individual Product Level 20 Units Rate per Unit 595 $ 1,190.00 $7,08,050.00 595 $ 1,071.00 $ 6,37,245.00 21 Units Rate per Unit $ 690.00 $ Amount Amount Ending Inventory at cost Ending Inventory at NRV Ending Inventory at cost 3,46,885.00 22 595 595 $ Ending Inventory at NRV 4,10,550.00 23 $6,37,245.00 Lower of Cost or NRV 3,46,885.00 Lower of Cost or NRV 24 25 Category Level Residential Pumps Commercial pumps Total $ 26 27 3,46,885.00 $ $ 7,08,050.00 $ 10,54,935.00 6,37,245.00 $ 10,47,795.00 Ending Inventory at cost 28 4,10,550.00 $ Ending Inventory at NRV 29 $10,47,795.00 Lower of Cost or NRV 30 31

A В D E G Н 1 FIFO Method FIFO Method Commercial pumps Residential Pumps 4 Units Rate per Unit Amount Units Rate per Unit Amount -C5*D5 =H5*15 5 Inventory at Feb 28 238 476 Inventory at Feb 28 714 952 Purchases - Mar 10 -С6*D6 Purchases - Mar 3 6 595 536 714 1071 =H6*16 Sales on Mar 15 First 238 from beginning Invenory =H7*17 Purchases Mar 12 7 357 1131 Sales-Mar 18: First 714 from beginning Invenory Next 357 Units from Mar 3 Purchases Balance as Mar 18 C8*D8 238 -D5 Next 357 Units from Mar 10 Purchases -595-C8 C9*D9 =H9*19 9 =D6 =H5 =15 Balance on Mar 15 =C10*D10 =H10*110 10 -С6-С9 D6 1071-H916 -C11*D11 Purchases Mar 20 11 476 565 Sales on Mar 25: Purchases - Mar 3 -H6-H10 1071 =H12*112 12 First 238 Units from Mar 10 purchases C13*D13 Purchases -Mar 12 =H13*13 13 C10 =D10 357 1131 Next 238 Units from Mar 20 Purchases -476-C13 -C14*D14 Purchases - Mar 21 =H14*114 14 -D11 595 1190 -C15*D15 Sales on Mar 29 Balance on Mar 25 -C11-C14 15 565 Purchases Mar 30 C16*D16 From Purchases - Mar 3 1071 =H16*16 16 357 595 H12 Ending Balance =SUM(C15:C16) SUM(E15:E16) From Purchases - Mar 12 =H17*17 17 H13 1131 Ending Balance =H18*118 18 595 1190 19 Individual Product Level 20 21 Units Rate per Unit Amount Units Rate per Unit Amount Ending Inventory at cost Ending Inventory at NRV Ending Inventory at cost -E17 =l18 =J18 22 C17 H18 H23*123 Ending Inventory at NRV C23*D23 23 595 690 595 1071 EMIN(J22,J23) Lower of Cost or NRV MIN(E22,E23) Lower of Cost or NRV 24 25 26 Category Level Residential Pumps Commercial pumps Total 27 Ending Inventory at cost -SUM(D28:E28) 28 -E17 J18 - E23 Ending Inventory at NRV SUM(D29:E29) MIN(F28,F29) 29 23 Lower of Cost or NRV 30 31

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