Question

E7-12 Reporting Inventory at Lower of Cost or Market/Net Realizable Value [LO 7-4] Sanda's Company is preparing the annual financlal statements dated December 31. Ending inventory is presenty recorded at its total cost of $10,250. Information about Its inventory items follows: Unit Cost Quantity When Acquired (FIFO) $90 Value Froduct Line on Hand at Year-End Air lo $92 25 Blister 80 76 15 Buster Coolonite 70 20 13 Dudesly 60 90 96 Required: 1. Compute the LCM/NRV wrlte-down per unit and in total for each item in the table. Also compute the total overal write-down for all items. 2. How will the wite-down of inventory to lower of cost or marketnet realzable value affect the company's expenses reported for the year ended December 31? 3. Compute the amount that should be reported for the inventory on December 31, after the LCM/NRv rule has been appled to each item. Complete this question by entering your answers in the tabs below. Required Required Required 1 Compute the amount that should be reported for the inventory on December 31, after the 2 3 Written-down inventory Required 2 Required 3

Answer 1

Solution 1:

32 YK 33 Product Line Computation of LCM/NRV Write-down Write-down per item Total Write Down Quantity on | (Unit Cost-Value at (Quantity* write Hand end) down per item) sol $0 1 5 $4 $60 70 $7 $490 60 $0 $0 36 25 37 Air flow Blister Buster Coolonite Dudesly 38 39 40 41 Total $550 44 45 46 52 53 54 55 59 60 61 62 64 65 66 7) Sheet366 Sheet373 Sheet374 Sheet6 (3) She

Solution 2:

Cost of goods sold will increase by $550. I.e. by the amount of total write down.

Solution 3:

Written down inventory = $10250 - $550 = $9,700