Question

Solomon Thomas Inc. (STI) sells three products: football helmets, football pads, and football cleats. STI is using the FIFO cost flow assumption. After taking their physical inventory on December 31, 2017, the following information is obtained: Football Helmets -cost $45,000, market value $47,000; Football Pads - cost $59,000, market value $55,000; Football Cleats -cost $19,000, market value $18,000. STI is deciding whether to apply the lower-of-cost-or-market (LCM) on an individual item basis or to the total inventory. The difference between the two methods of application would result in

Answer 1

Pq No - 0 Solution - Given Data : - → Soloman Football Thomas helmets, Inc (STI) Sells three products Football pads and cleats, FIFO Cost flow STI is using Assumption. • Football Helmets - Cost = $45000 market value = $47000 Football pad - Cost = $59,000 Market value = $55,000 Football cleats Cost = $19,000 Market value = $18,000 All If lower of cost or market is applied individual item Basis: - on Cost Market value Lowest Cost (or Market value $ 47,000 $45,000 $ 45,000 • Football Helmets $55,000 $ 59,000 $ 55,000 •Football pad 18,000 $19000 $19.000 Football cleats

Pg No - ② NOW Ending Inventory:-*45000+ AN Cost + market value + Lower Cost (or market value $45,000 + 55,000 + $ 18,000 - $ 118,000 - Ending Inventory = $118,000. If Lower of cost or market is applied on Total Inventory 3 - Cost Market value Football Helmets $47,000 $45,000 $59,000 Football pads Football cleats $55000 $18,000 $19,000 $ 123,000 Total $120,000 i. Ending Inventory: - → Market values of the foot Boll items. = 47,000 + 55,000 + 18,000 - $ 120,000 Ending Inventory = $120,000

Pg No - 3 {minimum of Market cost $123,000 tost ok but ab value $120,000 } Now , the two methods af The difference between application iş :- → $120,000 - $118.000 - $2,000 (of Inventory value} Elence, The difference between the two methods of application is $2000