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ANSWER
Product | Ceiling | Floor | Market | Cost | LCM | Quantity | total |
A | 9.81 | 7.85 | 9.16 | 8.18 | 8.18 | 1,800 | 14,724 |
B | 9.27 | 7.96 | 8.61 | 8.94 | 8.61 | 1,500 | 12,915 |
C | 6.6 | 5.95 | 5.89 | 6.10 | 5.89 | 1,700 | 10,013 |
D | 6 | 4.36 | 4.58 | 4.14 | 4.14 | 1,700 | 7,038 |
E | 6.54 | 5.45 | 6.87 | 6.98 | 6.87 | 2,100 | 14,427 |
Ceiling = selling price - disposal price | |||||||
Floor = ceiling - normal profit margin | |||||||
Market = replacement cost | |||||||
if current replacement cost >ceiling then ceiling is market | |||||||
if current replacement cost <floor then floor is market |
Item | Quantity | cost | Market |
A | 1,800 | 14,724 | 16,488 |
B | 1,500 | 13,410 | 12,915 |
C | 1,700 | 10,370 | 10,013 |
D | 1,700 | 7,038 | 7,786 |
E | 2,100 | 14,658 | 14,427 |
60,200 | 61,629 |
Account Titles and Explanation |
Debit |
Credit |
Cost of Goods sold Method: | ||
Cost of Goods sold(61,629-60,200) |
$1,429 |
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Allowance to Reduce Inventory to Market |
1,429 |
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The Loss method: | ||
Loss Due to Decline of Inventory to NRV |
1,429 |
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Allowance to Reduce Inventory to Market |
1,429 |
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