In some instances, accounting principles require a departurefrom valuing inventories at cost alone. Determinethe proper unit inventory price in the following cases,under the lower-of-cost-or-market rule. Cases3$15.90 $16.10Cost$15.90$15.9010.40$15.90Net realizable valueNet realizable value14.5019.2015.2016.40less normal profitMarket12.8017.6013.758.8014.80(replacement cost)16.8014.8017.2012.809.70

Lower-of-cost-or-market value: The lower-of-cost-or-market value is a method which requires the…

Cases 3 $15.90 $16.10 Cost $15.90 $15.90 10.40 $15.90 Net realizable value Net realizable value 14.50 19.20 15.20 16.40 less normal profit Market 12.80 17.60 13.75 8.80 14.80 (replacement cost) 16.80 14.80 17.20 12.80 9.70

Cases 3 $15.90 $16.10 Cost $15.90 $15.90 10.40 $15.90 Net realizable value Net realizable value 14.50 19.20 15.20 16.40 less normal profit Market 12.80 17.60 13.75 8.80 14.80 (replacement cost) 16.80 14.80 17.20 12.80 9.70

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

In some instances, accounting principles require a departure
from valuing inventories at cost alone. Determine
the proper unit inventory price in the following cases,
under the lower-of-cost-or-market rule.

Cases
3
$15.90 $16.10
Cost
$15.90
$15.90
10.40
$15.90
Net realizable value
Net realizable value
14.50
19.20
15.20
16.40
less normal profit
Market
12.80
17.60
13.75
8.80
14.80
(replacement cost)
16.80
14.80
17.20
12.80
9.70

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