Question

SLR Corporation has 1,400 units of each of Its two products in its year-end Inventory. Per unit data for each of the products are as follows: Product 1 Product $62 $46 60 Cost Replacement cost Selling price Selling costs Normal profit Determine the carrying value of SLR's Inventory assuming that the lower of cost or market (LCM) rule is applied to individual products. What is the before-tax income effect of the LCM adjustment? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the carrying value of SLR's inventory assuming that the lower of cost or market (LCM) rule is applied to Individual products. Per Unit Lower of Product Cost Market Inventory Unit Cost Cost or Value Market 1.400 1.400 53,200 Costs 53,200 OS 10 Required 2 > Prey 4 of

Answer 1

Solution Required 1.: Step-1: Compute the NRV per unit and NRV-NP per unit Normal Selling Unit (NRV-NP) Profit NRV Selling Product Costs Per unit per unit per unit Price Per unit (NP) $82 $18 $64 $22 $42 1 $48 $4 $44 $8 $36 2 Step-2: Determine the Market Value per unit Replacement Market NRV NRV-NP Value Product Cost Per Unit (ceiling) (Floor) (RC) Per unit $60 $64 $42 $60 1 $38 $44 $36 $38 2 Step-3: Determine the carrying value of inventory Per Unit Lower of Product Market Inventory Unit Cost Cost or Cost Value Market $86,800 $84,000 $53,200 $62 $60 $60 1 1,400 $46 $38 $38 1,400 $64,400 $151,200 2 Cost Inventory value $137,200 Required 2.: Before tax income effect of the LCM adjustment Cost of Inventory $151,200 $137,200 Lower of Cost or Market Loss on write down the inventory ($151,200 $137,200) $14,000 Decrease in income before tax $14,000 Before-tax income effect lower by $14,000