Stiles Corporation uses the lower of cost or market rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows:
product A | Product B | |
Historical cost | $80 | $95 |
replacement cost | $70 | $98 |
estimated cost of disposal | $32 | $30 |
estimated selling price | $150 | $120 |
Product A | $ per unit |
Product B | $ per unit |
Product A | $ per unit |
Product B | $ per unit |
For Product A, the use of a “ ” constraint prevents an excessive write-down of inventory. If the constraint were not imposed, an excessive loss would be recognized in the period of the write-down followed by an excessive profit in future periods. Therefore, the imposition of the constraint prevents the profit distortion that would occur by an understatement of inventory and overstatement of losses in the current period.
For Product B, the use of a " " constraint prevents inventory from being valued at an amount that exceeds the amount the company could realize by seliling it.
***** choices for answer 3 is ceiling, Floor, profit.
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1)The inventory value for each product with FIFO cost flow assumption is calculated as below:
Product | NRV (Selling Price - Estimated Cost of Disposal) | Market Value (Selling Price - Estimated Cost of Disposal) | Cost | Inventory Value (Lower of Cost or Market) |
A | 118 | 118 | 80 | $80 |
B | 90 | 90 | 96 | $90 |
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2)The inventory value for each product with LIFO cost flow assumption is determined as below:
Product | NRV (Selling Price - Estimated Cost of Disposal) | Replacement Cost | NRV-Normal Profit | Market Value (Mid Value of NRV, Replacement Cost and NRV - Normal Profit Margin) | Cost | Inventory Value |
A | 118 | 70 | 73 (118 - 30%*150) | 73 | 80 | $73 |
B | 90 | 98 | 54 (90 - 30%*120) | 90 | 96 | $90 |
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Stiles Corporation uses the lower of cost or market rule for each of two products in...
Lower of Cost or Market Stiles Corporation uses the lower of cost or market rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows: Product A Product B Historical cost $80 $96 Replacement cost 70 98 Estimated cost of disposal 32 30 Estimated selling price 150 120 Required: Assume that Stiles uses the FIFO inventory method. What...
Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product Specific data for each product are as follows: Historical cost Product A Product B $80 $96 Replacement cost 98 Estimated cost of disposal Estimated selling price 30 150 120 Required: What is the correct inventory value...
Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling pric considered normal for each product Specific data for each product are as follows: Product A Product B Historical cost $80 $95 Replacement cost 31 Estimated cost of disposal Estimated selling price 150 Required: What is the correct inventory value for each product?...
Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product Specific data for each product are as follows: Product A Product B $81 $96 71 9 98 Historical cost Replacement cost Estimated cost of disposal Estimated selling price 32 25 150 120 Required: What is the...
Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows: Product A Product B Historical cost $80 $95 Replacement cost 71 99 Estimated cost of disposal 32 27 Estimated selling price 150 120 Required: What is the correct...
(8 points) Smashing Pumpkins Company uses the
lower-of-cost-or-market method, on an individual-item basis, in
pricing its inventory items. The inventory at December 31, 2014,
consists of products D, E, F, G, H, and I. Relevant per-unit data
for these products appear below.
Item D
Item E
Item F
Item G
Item H
Item I
Estimated selling price
$130
$100
$90
$85
$105
$80
Cost
70
80
60
80
45
32
Replacement cost
110
65
70
30
70
30
Estimated selling...
3. (8 points) Smashing Pumpkins Company
uses the lower-of-cost-or-market method, on an individual-item
basis, in pricing its inventory items. The inventory at December
31, 2014, consists of products D, E, F, G, H, and I. Relevant
per-unit data for these products appear below. Item D Item E Item F
Item G Item H Item I Estimated selling price $130 $100 $90 $85 $105
$80 Cost 70 80 60 80 45 32 Replacement cost 110 65 70
30 70 30 Estimated...
31. When using a perpetual inventory system, a. no Purchases account is used. b. a Cost of Goods Sold account is used. c. two entries are required to record a sale. d) All of these answer choices are correct sold for 2017, net income for 2017, and assets at December 31, 2018, respectively, are a. overstatement, understatement, overstatement. 32. If the beginning inventory for 2017 is overstated, the effects of this error on cost of goods overstatement, understatement, no effect....
Moore Corporation uses the com LO imp Ald ADA cation uses the FIFO cost flow method and has numerous units of two products ding inventory. Each is accounted for at the lower of cost or net realizable value under inting Standards Update (ASU) 2015-11. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows: Product 1 Product 2 Historical cost $ 17 $ 45 Replacement cost Estimated cost...
3. (8 points) Smashing Pumpkins Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Item D Item E Item F Item G Item H Item I Estimated selling price $130 $100 $90 $85 $105 $80 70 80 60 80 Cost 45 32 Replacement cost Estimated selling expense Normal profit 110 65...