Homework Answers
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| Answer 1 |
| Generally Accepted Accounting Principle allows a company to carry its inventory at an amount less than its cost if it is prevalent that the net realizable value is lower than its cost. It is called Lower of cost or market rule. |
| Answer 2 |
| Asset account is affected because inventory balance is reduce. |
| Equity account is affected because loss is booked in income statement which reduces equity. |
| Answer 3 |
| The current period income will reduce because loss will be booked due to inventory write off. |
| The future period income will depend on the value at which inventory will be sold. |
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Lower-of-Cost-or-Market Rule Awards Etc. carries an inventory of trophies and ribbons for local sports teams and...
Lower of Cost or Market Stiles Corporation uses the lower of cost or market rule for...
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...
Stiles Corporation uses the lower of cost or market rule for each of two products in...
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 Assume that Stiles uses the FIFO inventory method. What is the correct inventory value for...
Callowater Golf Clubs, Inc., uses the LIFQ inventory method and values its inventory using the lower-of-cost-or-market...
Callowater Golf Clubs, Inc., uses the LIFQ inventory method and values its inventory using the lower-of-cost-or-market (LCM) rule. Callowater Golf Clubs Inc. has the following account balances at December 31, 2018 before releasing its financial statements for the year Th i Data Table 6 - X of Del Rel Cost of goods sold Sales revenue Re Beg Bal Inventory 38,900 68,900 Th End Bal Bal 224.000 Bal 372.500 Re Ac she Print Done Requirement 3. Prepare any adjusting journal entry...
Ivanhoe Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is...
Ivanhoe Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2017. Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit A 1,900 $9.23 $10.33 $12.92 $1.85 $2.21 B 1,600 10.09 9.72 11.56 1.11 1.48 C 1,800 6.89 6.64 8.86 1.41 0.74 D 1,800 4.67 5.17 7.75 0.98 1.85 E 2,200 7.87 7.75 8.24 0.86 1.23 Greg Forda...
Metlock Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is...
Metlock Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company's inventory records as of December 31, 2020. Normal Profit Margin/Unit Item Unit Cost $8.33 9.10 6.22 Quantity 1,600 1,300 1,500 1,500 1,900 $2.00 Replacement Cost/Unit $9.32 8.77 5.99 4.66 6.99 Estimated Selling Price/Unit $11.66 10.43 7.99 6.99 7.44 Completion & Disposal Cost/Unit $1.67 1.00 1.28 0.89 0.78 1.33 4.22 0.67 1.67 1.11 7.10 Greg Forda is an accounting clerk in...
E7-12 Reporting Inventory at Lower of Cost or Market/Net Realizable Value [LO 7-4) Sandals Company is...
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...
Alejandro Limited is a public company that uses the lower-of-cost or ne realizable value (NRV) rule...
Alejandro Limited is a public company that uses the lower-of-cost or ne realizable value (NRV) rule under the allowance method for reporting inventory on its Statement of Financial Position using the. The company also uses a perpetual inventory control system. At the end of 2018, Alejandro Inc. had four items in its inventory (not living animals), two o which management believed should be written down. The cost and NRV of the items are as follows: Item A Quantity Cost 170...
Problem 9-5 Waterway Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following...
Problem 9-5
Waterway Co. follows the practice of valuing its inventory at the
lower-of-cost-or-market. The following information is available
from the company’s inventory records as of December 31, 2017.
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling
Price/Unit
Completion & Disposal
Cost/Unit
Normal Profit
Margin/Unit
A
1,300
$8.78
$9.83
$12.29
$1.76
$2.11
B
1,000
9.59
9.24
11.00
1.05
1.40
C
1,200
6.55
6.32
8.42
1.35
0.70
D
1,200
4.45
4.91
7.37
0.94
1.76
E
1,600
7.49
7.37
7.84
0.82
1.17...
Problem 9-5 Pearl Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following...
Problem 9-5
Pearl Co. follows the practice of valuing its inventory at the
lower-of-cost-or-market. The following information is available
from the company’s inventory records as of December 31, 2017.
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling
Price/Unit
Completion & Disposal
Cost/Unit
Normal Profit
Margin/Unit
A
1,800
$8.18
$9.16
$11.45
$1.64
$1.96
B
1,500
8.94
8.61
10.25
0.98
1.31
C
1,700
6.10
5.89
7.85
1.25
0.65
D
1,700
4.14
4.58
6.87
0.87
1.64
E
2,100
6.98
6.87
7.30
0.76
1.09...
Question 2 Swifty Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following...
Question 2
Swifty Co. follows the practice of valuing its inventory at the
lower-of-cost-or-market. The following information is available
from the company’s inventory records as of December 31, 2020.
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling
Price/Unit
Completion & Disposal
Cost/Unit
Normal Profit
Margin/Unit
A
1,200
$8.70
$9.74
$12.18
$1.74
$2.09
B
900
9.51
9.16
10.90
1.04
1.39
C
1,100
6.50
6.26
8.35
1.33
0.70
D
1,100
4.41
4.87
7.31
0.93
1.74
E
1,500
7.42
7.31
7.77
0.81
1.16...
Callowater Golf Clubs, Inc., uses the LIFQ inventory method and values its inventory using the lower-of-cost-or-market (LCM) rule. Callowater Golf Clubs Inc. has the following account balances at December 31, 2018 before releasing its financial statements for the year Th i Data Table 6 - X of Del Rel Cost of goods sold Sales revenue Re Beg Bal Inventory 38,900 68,900 Th End Bal Bal 224.000 Bal 372.500 Re Ac she Print Done Requirement 3. Prepare any adjusting journal entry...
Metlock Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company's inventory records as of December 31, 2020. Normal Profit Margin/Unit Item Unit Cost $8.33 9.10 6.22 Quantity 1,600 1,300 1,500 1,500 1,900 $2.00 Replacement Cost/Unit $9.32 8.77 5.99 4.66 6.99 Estimated Selling Price/Unit $11.66 10.43 7.99 6.99 7.44 Completion & Disposal Cost/Unit $1.67 1.00 1.28 0.89 0.78 1.33 4.22 0.67 1.67 1.11 7.10 Greg Forda is an accounting clerk in...
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...
Alejandro Limited is a public company that uses the lower-of-cost or ne realizable value (NRV) rule under the allowance method for reporting inventory on its Statement of Financial Position using the. The company also uses a perpetual inventory control system. At the end of 2018, Alejandro Inc. had four items in its inventory (not living animals), two o which management believed should be written down. The cost and NRV of the items are as follows: Item A Quantity Cost 170...
Problem 9-5
Waterway Co. follows the practice of valuing its inventory at the
lower-of-cost-or-market. The following information is available
from the company’s inventory records as of December 31, 2017.
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling
Price/Unit
Completion & Disposal
Cost/Unit
Normal Profit
Margin/Unit
A
1,300
$8.78
$9.83
$12.29
$1.76
$2.11
B
1,000
9.59
9.24
11.00
1.05
1.40
C
1,200
6.55
6.32
8.42
1.35
0.70
D
1,200
4.45
4.91
7.37
0.94
1.76
E
1,600
7.49
7.37
7.84
0.82
1.17...
Problem 9-5
Pearl Co. follows the practice of valuing its inventory at the
lower-of-cost-or-market. The following information is available
from the company’s inventory records as of December 31, 2017.
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling
Price/Unit
Completion & Disposal
Cost/Unit
Normal Profit
Margin/Unit
A
1,800
$8.18
$9.16
$11.45
$1.64
$1.96
B
1,500
8.94
8.61
10.25
0.98
1.31
C
1,700
6.10
5.89
7.85
1.25
0.65
D
1,700
4.14
4.58
6.87
0.87
1.64
E
2,100
6.98
6.87
7.30
0.76
1.09...
Question 2
Swifty Co. follows the practice of valuing its inventory at the
lower-of-cost-or-market. The following information is available
from the company’s inventory records as of December 31, 2020.
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling
Price/Unit
Completion & Disposal
Cost/Unit
Normal Profit
Margin/Unit
A
1,200
$8.70
$9.74
$12.18
$1.74
$2.09
B
900
9.51
9.16
10.90
1.04
1.39
C
1,100
6.50
6.26
8.35
1.33
0.70
D
1,100
4.41
4.87
7.31
0.93
1.74
E
1,500
7.42
7.31
7.77
0.81
1.16...
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