Question

Part A Santana Rey of Business Solutions is evaluating her inventory to determine whether it must be adjusted based on lower of cost or market rules. Business Solutions has three different types of software in its inventory, and the following information is available for each Per Unit Inventory Items Office productivity Desktop publishing Accounting Units Cost S 76 Market $ 74 103 100 3 90 96 Required: 1. & 2. Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or market rule to inventory as a whole and and lower of cost or market rule to each product inventory. Must Rey adjust the reported inventory value? Part B Selected accounts and balances for the three months ended March 31, 2018, for Business Solutions follow. January 1 beginning inventory Cost of goods sold March 31 ending inventory 14,052 704 Compute inventory turnover and days' sales in inventory for the three months ended March 31, 2018. Part B Part A 1. & 2. Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or market rule to cost or market rule to each product in inventory. Must Rey adjust the reported inventory ry as a whole and lower value? BUSINESS SOLUTION S Per Unit LCM Applied To Items Inventory Items Office productivity Desktop publishing Total Cost Units Cost Market Total Market 3 76 74 2 103 100 Accounting 3 90 96 0 S Totals 0 S Lower of cost or market rule to inventory as a whole Rey must adjust the reported inventory value Lower of cost or market rule to each product in inventory Rey must adjust the reported inventory value

Answer 1

A G H Solution Part A per unit 3 LCM applied Inventory Items Units Market Total cost Total market to cost office productivity 76 228 222 222 Compare total cost and total (3 76) (3 74) market, select the lower) 6 Desktop publishing 103 100 206 200 200 7 OC (2 100) (2 103) Accounting 90 96 270 288 270 (3*90) (3*96) 10 710 Total 704 692 11 17 (compare total cost and total market totals lower of cost or market rule to inventory as a whole 704 13 select the lower) Rey must adjust the reported inventory value No 14 15 Lower of cost or market rule to each product in inventory 692 16 Rey must adjust the reported inventory value Yes 17 18 Part b 15 inventory turnover 20 Choose Numeratoi/ choose Denominator Inventory turnover 21 Average inventory cost of good sold Inventory turnover 22 14052/ 352 39.9204545 23 (04704)/2-352 or 39.92 24 25 Days sales in inventory 26 cost of good sold Ending inventory Ratio 27 365 704 18.286365 days 14052 0.05009963 28 or 18.3 days or average inventory/ 352/ cost of good sold 30 Ratio 365 9.1431825 days 14052 0.02504981 31 or 9.1 days 32 or 365 / inventory turnover ratio Ratio 33 365 / 39.92045455 9.14318247 days 34 or 9.1 days 35 36 37 74 NM