Question

Serial Problem Business Solutions LO P2, A3 Part A Santana Rey of Business Solutions is evaluating her inventory to determine whether it must be adjusted based on lower of cost or market rules. Business Solutions has three different types of software in its inventory, and the following information is available for each. Units Inventory Items Office productivity Desktop publishing Accounting NON Per Unit Cost Market $ 82 $ 84 108 111 104 101 7 Required: Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or market rule to each product in inventory. Must Rey adjust the reported inventory value? Part B Selected accounts and balances for the three months ended March 31, 2020, for Business Solutions follow. Beginning inventory, January 1 Cost of goods sold Ending inventory, March 31 $ 0 31,200 1,950 Compute inventory turnover and days' sales in inventory for the three months ended March 31, 2020.

Answer 1

Inventory Items	Units	Cost per unit	Market Per unit	Cost	Market	LCM applied To items
Office Productivity	7	82	84	$ 574	$ 588	$ 574
Desktop Publishing	6	108	111	$ 648	$ 666	$ 648
Accounting	7	104	101	$ 728	$ 707	$.707
Total				$ 1,950	$ 1,961	$ 1,929

Lower of cost or market rule to each product in inventory = $ 1,929 Rey must adjust the reported inventory value by $ 21

B) Average Inventory =( Beginning inventory + Ending Inventory) /2

= $ 975

Inventory Turnover = Cost of goods sold / Average Inventory

= $ 31,200 / $ 975 = 32

II) Days Sale in Inventory = No. of Days in period / Inventory Ratio

= 90/ 32 = 2.81 days