Kingbird Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2020.Item Quantity Unit Cost ReplacementCost/Unit Estimated SellingPrice/Unit Completion & DisposalCost/Unit Normal ProfitMargin/UnitA 1,400 $8.48 $9.49 $11.87 $1.70 $2.03 B 1,100 9.27 8.93 10.62 1.02 1.36 C 1,300 6.33 6.10 8.14 1.30 0.68 D 1,300 4.29 4.75 7.12 0.90 1.70 E 1,700 7.23 7.12 7.57 0.79 1.13 Greg Forda is an accounting clerk in the accounting department of Kingbird Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant. Calculate the lower-of-cost-or-market using the individual-item approach.

Lower of cost or market method (LCM) refers to the state when the company's inventory is valued and…

Answered: Greg Forda is an accounting clerk in…

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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Kingbird Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2020.

Item	Quantity	Unit Cost	Replacement Cost/Unit	Estimated Selling Price/Unit		Completion & Disposal Cost/Unit	Normal Profit Margin/Unit
A	1,400	$8.48	$9.49		$11.87		$1.70	$2.03
B	1,100	9.27	8.93		10.62		1.02	1.36
C	1,300	6.33	6.10		8.14		1.30	0.68
D	1,300	4.29	4.75		7.12		0.90	1.70
E	1,700	7.23	7.12		7.57		0.79	1.13

Greg Forda is an accounting clerk in the accounting department of Kingbird Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.

Calculate the lower-of-cost-or-market using the individual-item approach.

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