Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Textbook Question
Chapter 10, Problem 10.6P
Lower of Cost or Market. O'Sullivan Corporation provided the following information regarding its ending inventory for the current year O’Sullivan manufactures three types of athletic shoes Selling costs are 10% of the selling price The company values its ending inventory at the lower of LIFO cost or market.
There are 1,000 units of each product in inventory.
| Product | LIFO Cost | Current Replacement Cost |
Selling Price | Normal Profit Margin |
| Assurant | $210 | $225 | $260 | 30% |
| Biglow | 250 | 220 | 280 | 20% |
| Cartata | 170 | 140 | 200 | 15% |
*As a percentage of selling price.
Required
- a. Compute the amount of write-down, if any, on both an individual and a total inventory basis.
- b. Prepare any
journal entries necessary to reflect the inventory at lower of cost or market assuming that O’Sullivan uses the indirect method. - c. Repeat requirement (b) assuming that O’Sullivan uses the direct method to record any required write-down to lower of cost or market.
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SLR Corporation has 1,000 units of each of its two products in its year-end inventory. Per unit data for each of the products are as follows:
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$48
$26
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$70
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Chapter 10 Solutions
Intermediate Accounting
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