Question

Brooks Company carries three inventory items. The following information pertains to the ending inventory Item А F K Quantity 120 170 110 Unit Cost $60 80 30 Unit Market Value $55 75 40 Required a. Determine the ending inventory that Brooks will report on the balance sheet, assuming that it applies the lower-of-cost-or. market rule to individual inventory items. b. Calculate the adjustment required assuming the decline in value is immaterial

Answer 1

Solution

a	Ending Inventory	$   22,650
b	Adjustment	$      1,450

Working

Item	Quantity	Total Cost	Total Net market value	Lower of cost or market
A	120	$                 7,200	$        6,600	$      6,600
F	170	$              13,600	$      12,750	$   12,750
K	110	$                 3,300	$        4,400	$      3,300
Total				$   22,650

.

Item	Quantity	Cost per unit	Total Cost	NRV per unit	Total Net market value	Lower of cost or market
A	120	$                       60	$        7,200	$            55	$          6,600	$        6,600
F	170	$                       80	$      13,600	$            75	$        12,750	$     12,750
K	110	$                       30	$        3,300	$            40	$          4,400	$        3,300