Homework Answers
Ans)
a) Computation of ending inventory
| Item | Quantity | Unit cost | Total cost (A) | Unit market value | Total market value(B) | Value of ending inventory (lower of A or B) |
| P1 | 60 | 85 | 5100 | 90 | 5400 | 5100 |
| P2 | 40 | 70 | 2800 | 72 | 2880 | 2800 |
| P3 | 80 | 130 | 10400 | 120 | 9600 | 9600 |
| P4 | 70 | 12 | 840 | 130 | 9100 | 840 |
| Total | 19140 | 26980 | 18340 |
Value of ending inventory = $18340
b)Journal entry
| Debit $ | Credit $ | |
| Cost of goods sold (Inventory loss) | 800 | |
| To Inventory | 800 |
(Entry for write down of inventory)
Total cost-Value of inventory
=19140-18340 = 800
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8.35
1.33
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Replacement
Cost/Unit
Estimated Selling
Price/Unit
Completion & Disposal
Cost/Unit
Normal Profit
Margin/Unit
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$9.83
$12.29
$1.76
$2.11
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9.59
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11.00
1.05
1.40
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6.32
8.42
1.35
0.70
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4.45
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0.94
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Item
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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
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8.94
8.61
10.25
0.98
1.31
C
1,700
6.10
5.89
7.85
1.25
0.65
D
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4.14
4.58
6.87
0.87
1.64
E
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6.98
6.87
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0.76
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Swifty Co. follows the practice of valuing its inventory at the
lower-of-cost-or-market. The following information is available
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Item
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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
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7.42
7.31
7.77
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