Question

Please help with this.
Cub Company, a calendar-year entity, had 3,000 geothermal heating pumps in its beginning inventory for 20X1. On December 31, 20XO, the heating pumps had been adjusted down to $870 per unit from an actual cost of $960 per unit. It was the lower of cost or market. Cub purchased no additional units during 20X1. The following additional information is provided for 20X1: Quarter Date March 31, 20x1 June 30, 2exi September 30, 2exi December 31, 20x1 Inventory (units) 1,899 1,450 1,350 Unit Market Value $865 889 858 868 Requlred: Respond to the following two independent scenarios as requested. a. Case 1: The company does not have sufficient experience with the seasonal market for geothermal pumps and assumes that any reductions in market value during the year will be permanent. (1) Determine the cost of goods sold for each quarter. Quarter Cost of goods sold IV Total (2) Verify the total cost of goods sold by computing annual cost of goods sold on a lower-of-cost-or-market basis. Cost of goods sold

Answer 1

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Part a1
	Cost of		Inventory Adjustment	=	Cost of
Quarter	Units Sold	+/-	to Market		Goods Sold
I	$                   1,044,000	+	$                                      9,000	=	$       1,053,000
	1,200*$870		1,800*$5
			write down to $865
II	$                      302,750	-	$                                      7,250	=	$          295,500
	350*$865		1,450*$5
III	$                         87,000	+	$                                    27,000	=	$          114,000
	100*$870		1,350*$20
IV	$                      314,500	-	$                                      9,800	=	$          304,700
	370*$850		980*$10
Total					$       1,767,200
Part a2
Annual basis:
	$                   1,757,400	+	$                                      9,800	=	$       1,767,200
	2,020*$870		980*$10
Part b1
	Cost of		Inventory Adjustment	=	Cost of
Quarter	Units Sold	+/-	to Market		Goods Sold
I	$                   1,044,000			=	$       1,044,000
	1,200*$870
II	$                      304,500			=	$          304,500
	350*$870
III	$                         87,000			=	$             87,000
	100*$870
IV	$                      321,900	+	$                                      9,800	=	$          331,700
	370*$870		980*$10
Total					$       1,767,200
Part a2
Annual basis:
	$                   1,757,400	+	$                                      9,800	=	$       1,767,200
	2,020*$870		980*$10