Rose Co. sells one product and uses the last-in, first-out method to determine inventory cost. Information for the month of January follows: Beginning inventory, 1/18,000 Purchases, 1/5 Sales Rose has determined that at January 31, the replacement cost of its inventory was $8 per unit, and the net realizable value was $8.80 per unit. Rose's normal profit margin is $1 per unit. Rose applies the lower-of-cost-or-market rule to total inventory and records any resulting loss. At January 31, what should be the net carrying amount of Rose's inventory? OA) $80,000 OB) $79,000 OC) $78,000 Total Units Unit Cost D) $81,400 12,000 10,000 $8.20 7.90

Rose Co. sells one product and uses the last-in, first-out method to determine inventory cost. Information for the month of January follows: Beginning inventory, 1/18,000 Purchases, 1/5 Sales Rose has determined that at January 31, the replacement cost of its inventory was $8 per unit, and the net realizable value was $8.80 per unit. Rose's normal profit margin is $1 per unit. Rose applies the lower-of-cost-or-market rule to total inventory and records any resulting loss. At January 31, what should be the net carrying amount of Rose's inventory? OA) $80,000 OB) $79,000 OC) $78,000 Total Units Unit Cost D) $81,400 12,000 10,000 $8.20 7.90

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

Rose Co. sells one product and uses the last-in, first-out method to determine
inventory cost. Information for the month of January follows:
Beginning inventory, 1/18,000
Purchases, 1/5
Sales
Rose has determined that at January 31, the replacement cost of its inventory was
$8 per unit, and the net realizable value was $8.80 per unit. Rose's normal profit
margin is $1 per unit. Rose applies the lower-of-cost-or-market rule to total
inventory and records any resulting loss. At January 31, what should be the net
carrying amount of Rose's inventory?
OA) $80,000
OB) $79,000
OC) $78,000
Total Units Unit Cost
D) $81,400
12,000
10,000
$8.20
7.90

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Step 1: Introduce to LIFO METHOD and Lower of cost or market rule

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Step 2: Working for cost of inventory using LIFO

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Step 3: Working for total market value of inventory

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