Question

E7-12 Reporting Inventory at Lower of Cost or Market/Net Realizable Value [LO 7-4) Sandals Company is preparing the annual financial statements dated December 31. Ending inventory is presenty recorded at ts total cost of $10.250. Information about its Inventory items ollows: Unit Cost Quantity when required Value Product Line on Hand (PITO) at Year-End Air Flow $90 $92 Bllater 80 Buster Coolonite 70 Dudenly 15 Required: 1. Compute the LCMNRV write-down per unit and in total for each item in the table. Also compute the total overall write-down for all items. 2. How will the write-down of Inventory to lower of cost or market/net realizable 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 LCMNRV rule has been applied to each item. Complete this question by entering your answers in the tabs below. Required Required Required How will the write-down of inventory to lower of cost or market/net realizable value affect the company's expenses reported for the year ended December 31? Cost of goods sold by < Required 1 Required 3 >

Answer 1

1) Compute overall write down

	Quantity	Write down
Airflow	25	0
Blister buster	15	15*4 = 60
Coolonite	70	70*7 = 490
Dudesly	60	0
Total		550

2) Cost of goods sold will be increase by $550

3) Calculate ending inventory

	Quantity	Lower of cost or NRV
Airflow	25	25*90 = 2250
Blister buster	15	15*76 = 1140
Coolonite	70	70*13 = 910
Dudesly	60	60*90 = 5400
Total		9700