P8.5 (LO 2) Writing (Lower-of-Cost-or-Market) Fiedler 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, 2025. Item ABCDE Quantity 1,100 Cost Unit Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Normal Cost/Unit Profit Margin/Unit $7.50 $8.40 $10.50 $1.50 $1.80 800 8.20 7.90 9.40 0.90 1.20 1,000 5.60 5.40 7.20 L15 0.60 1.000 3.80 4.20 6.30 0.80 1.50 1,400 6.40 6.30 6.70 0.70 1.00 Instructions Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot under stand 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. a. Calculate the lower-of-cost-or-market using the individual-item approach. b. Show the journal entry he will need to make in order to write down the ending inventory from cost to market. c. Write a memo to Greg explaining what designated market value is as well as how it is computed. Use your calculations to aid in your explanation.
P8.5 (LO 2) Writing (Lower-of-Cost-or-Market) Fiedler 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, 2025. Item ABCDE Quantity 1,100 Cost Unit Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Normal Cost/Unit Profit Margin/Unit $7.50 $8.40 $10.50 $1.50 $1.80 800 8.20 7.90 9.40 0.90 1.20 1,000 5.60 5.40 7.20 L15 0.60 1.000 3.80 4.20 6.30 0.80 1.50 1,400 6.40 6.30 6.70 0.70 1.00 Instructions Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot under stand 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. a. Calculate the lower-of-cost-or-market using the individual-item approach. b. Show the journal entry he will need to make in order to write down the ending inventory from cost to market. c. Write a memo to Greg explaining what designated market value is as well as how it is computed. Use your calculations to aid in your explanation.
Chapter5: Operating Activities: Purchases And Cash Payments
Section: Chapter Questions
Problem 3.8C
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Transcribed Image Text:P8.5 (LO 2) Writing (Lower-of-Cost-or-Market) Fiedler 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, 2025.
Item
ABCDE
Quantity
1,100
Cost
Unit Replacement
Cost/Unit
Estimated
Selling
Price/Unit
Completion
& Disposal
Normal
Cost/Unit
Profit
Margin/Unit
$7.50
$8.40
$10.50
$1.50
$1.80
800
8.20
7.90
9.40
0.90
1.20
1,000
5.60
5.40
7.20
L15
0.60
1.000
3.80
4.20
6.30
0.80
1.50
1,400
6.40
6.30
6.70
0.70
1.00
Instructions
Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot under
stand 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.
a. Calculate the lower-of-cost-or-market using the individual-item approach.
b. Show the journal entry he will need to make in order to write down the ending inventory from cost
to market.
c. Write a memo to Greg explaining what designated market value is as well as how it is computed. Use
your calculations to aid in your explanation.
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