Question

Forester Company has five products in its inventory. Information about the December 31, 2018, inventory follows Unit Unit Replacement Selling Price Unit Cost Quantity 900 900 Cost Product $31 $ 25 30 $27 26 A 33 B 23 17 19 18 500 C 21 22 700 D 28 27 29 500 E The cost to sell for each product consists of a 10 percent sales commission. The normal profit percentage for each product is 35 percent of the selling price. Required: 1. Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or market (LCM) rule is applied to individual products. 2a. Determine the carrying value of inventory at December 31, 2018, assuming the LCM rule is applied to the entire inventory 2b. Assuming inventory write-downs are usual business practice for Forester, record any necessary year-end adjusting entry Complete this question by entering your answers in the tabs below. Req 2B Req 2A Req 1 Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or marke to individual products. (Do not round intermed iate calculations.) Inventory Value Product (units) Cost Market NRV-NP NRV RC A (900) B (900) C (500) D (700) E (500) Total Req 2A> Req 1

Answer 1

1.

Product (units)	RC	NRV	NRV-NP	Market	Cost	Inventory Value
A (900)	24300	25110	15345	24300	22500	22500
B (900)	23400	26730	16335	23400	27000	23400
C (500)	8500	10350	6325	8500	9000	8500
D (700)	13300	13230	8085	13230	15400	13230
E (500)	13500	12600	7700	12600	14500	12600
Total				82030	88400	80230

Working:

Product	Selling Price	Cost to Sell	NRV	Normal Profit	NRV - NP
A	31	3.10	27.90	10.85	17.05
B	33	3.30	29.70	11.55	18.15
C	23	2.30	20.70	8.05	12.65
D	21	2.10	18.90	7.35	11.55
E	28	2.80	25.20	9.80	15.40

Cost to sell = 10% x Selling price

NRV = Selling price - Cost to sell

Normal profit = 35% x Selling price

2a. Inventory carrying value: $82030

2b.

Event	General Journal	Debit	Credit
1	Cost of goods sold	6370
	Inventory ($88400 - $82030)		6370
	(To record inventory write-down)