![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9780132162302/9780132162302_largeCoverImage.gif)
Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
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.
Expert Solution & Answer
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Students have asked these similar questions
sharad
Please help with question
Herman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows:
Product 1
Product 2
Product 3
Cost
$
20
$
90
$
50
Selling price
40
120
70
Costs to sell
6
40
10
Required:What unit values should Herman use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory?
Product
Cost
NRV
Per Unit Inventory Value
1
2
3
Chapter 10 Solutions
Intermediate Accounting
Ch. 10 - How is inventory tracked under a perpetual...Ch. 10 - Barbara Wight is Chief Financial Officer at Taylor...Ch. 10 - What costs should be included in the unit cost of...Ch. 10 - When does the inventory allocation problem arise?Ch. 10 - Explain the difference between the FIFO method of...Ch. 10 - Which method of inventory results in an inventory...Ch. 10 - If unit costs are rising and inventory levels are...Ch. 10 - How can financial statements be converted from the...Ch. 10 - Explain the unit of measure under the dollar-value...Ch. 10 - What do firms use as the market value when...
Ch. 10 - Do U.S. GAAP and IFRS treat inventory write-downs...Ch. 10 - Under IFRS, how do firms determine...Ch. 10 - How does the conventional retail method...Ch. 10 - Why would a company use the gross profit method to...Ch. 10 - How are required LIFO disclosures used to compute...Ch. 10 - How does a company build LIFO layers under the...Ch. 10 - Giddens Company adopted the dollar-value UFO...Ch. 10 - The Loyd Company lad 150 units of product Omega on...Ch. 10 - Simmons, Inc. uses the lower-of-cost-or-market...Ch. 10 - Simmons, Inc. uses the lower-of-cost-or-market...Ch. 10 - The Loyd Company had 150 units of product Omega on...Ch. 10 - The Loyd Company had 150 units of product Omega on...Ch. 10 - On March 1, Year 1, LuxWear me had beginning...Ch. 10 - Types of Manufacturing Inventory. Complete the...Ch. 10 - Periodic Inventory System. Emmy Company uses a...Ch. 10 - Prob. 10.4BECh. 10 - Prob. 10.5BECh. 10 - FIFO, Perpetual Basis. Spider incorporated...Ch. 10 - LIFO, Perpetual Basis. Using the information...Ch. 10 - Prob. 10.8BECh. 10 - LIFO Reserve. Best Stores is considering a change...Ch. 10 - LIFO. Perpetual Basis. Source Enterprises reports...Ch. 10 - LIFO Liquidation. Using the information provided...Ch. 10 - Prob. 10.12BECh. 10 - Dollar-Value LIFO, Conversion to FIFO. Using the...Ch. 10 - Lower of Cost or Market. Count Clothing Company...Ch. 10 - Lower of Cost or Market. Using the information in...Ch. 10 - Lower of Cost or Market, IFRS. Using the...Ch. 10 - Prob. 10.17BECh. 10 - Prob. 10.18BECh. 10 - Lower of Cost or Market. Sarat Boot Company...Ch. 10 - Prob. 10.20BECh. 10 - Prob. 10.21BECh. 10 - Gross Profit Method. Sammi Company needs to...Ch. 10 - Prob. 10.23BECh. 10 - LIFO Retail Inventory Method. Complete the...Ch. 10 - LIFO Retail Inventory Method. Complete the...Ch. 10 - Moving Average, FIFO, LIFO. Arthur Lloyd...Ch. 10 - Moving Average, FIFO, LIFO, Presentation, and...Ch. 10 - Moving Average, FIFO, LIFO. Zoola, Inc. provided...Ch. 10 - Prob. 10.4ECh. 10 - LIFO, Conversion to FIFO. Inventory transactions...Ch. 10 - LIFO. Burke Company uses the LIFO perpetual method...Ch. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Lower of Cost or Market. All-Kinds-of-Cases...Ch. 10 - Prob. 10.10ECh. 10 - Lower of Cost or Market. Printmaster Distributors...Ch. 10 - Prob. 10.12ECh. 10 - Conventional Retail Inventory Method. Melvin...Ch. 10 - Gross Profit Method. A tsunami destroyed Kyoto...Ch. 10 - Prob. 10.15ECh. 10 - Dollar-Value LIFO Retail Inventory Method....Ch. 10 - Moving Average, FIFO, LIFO. Morocco Imports...Ch. 10 - Prob. 10.2PCh. 10 - Prob. 10.3PCh. 10 - Prob. 10.4PCh. 10 - Prob. 10.5PCh. 10 - Lower of Cost or Market. O'Sullivan Corporation...Ch. 10 - Conventional Retail Inventory Method. John Stevens...Ch. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Prob. 1JCCh. 10 - Prob. 2JCCh. 10 - Prob. 3JCCh. 10 - Prob. 1FSACCh. 10 - Prob. 2FSACCh. 10 - Prob. 1SSCCh. 10 - Prob. 2SSCCh. 10 - Surfing the Standards Case 3: Time Shares Treasure...Ch. 10 - Surfing the Standards Case 4: Lower of Cost or...Ch. 10 - Prob. 1BCCCh. 10 - Basis for Conclusions Case 2: The Lower of Cost or...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the annual ordering cost. 2. Compute the annual carrying cost. 3. Compute the cost of Ottiss current inventory policy. Is this the minimum cost? Why or why not?arrow_forwardWhen prices are rising (inflation), which costing method would produce the highest value for gross margin? Choose between first-in, first-out (FIFO); last-in, first-out (LIFO); and weighted average (AVG). Evansville Company had the following transactions for the month. Calculate the gross margin for each of the following cost allocation methods, assuming A62 sold just one unit of these goods for $10,000. Provide your calculations. A. first-in, first-out (FIFO) B. last-in, first-out (LIFO) C. weighted average (AVG)arrow_forwardHerman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Product 1 Product 2 Product 3 Cost $ 20 $ 90 $ 50 Replacement cost 18 85 40 Selling price 40 120 70 Selling costs 6 40 10 Normal profit 5 30 12 Required:What unit values should Herman use for each of its products when applying the lower of cost or market (LCM) rule to ending inventory? Product Cost Replacement cost NRV NRV - NP Market Per Unit Inventory Value 1 $20 $18 2 90 85 3 50 40arrow_forward
- Han Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Cost Selling price Costs to sell Product 1 2 3 Product 1 $40 100 6 Required: What unit values should Han use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory? Cost $ 40 110 70 Product 2 Product 3 $ 110 $70 180 130 80 30 NRV Per Unit Inventory Valuearrow_forwardSagararrow_forwardVinubhaiarrow_forward
- Han Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Cost Replacement cost Selling price Selling costs Normal profit Product 1 2 3 $ Cost Required: What unit values should Han use for each of its products when applying the lower of cost or market (LCM) rule to ending inventory? Product 1 $28 26 48 5 13 28 $ 98 58 Q Search Replacement cost 26 93 48 Product 2 $98 93 128 or 30 38 NRV Product 3 $58 48 60 10 20 W ENG 4x D 4:45 PM 11/27/2023arrow_forwardForest Company has five products in its inventory. Information about ending inventory follows. Unit Replacement Unit Selling Cost Price $ 21 $ 25 20 27 17 15 22 Product Quantity A 900 B 800 C D E 1,000 500 800 Unit Cost $19 24 12 16 23 The cost to sell for each product consists of a 15 percent sales commission. The normal profit for each product is 25 percent of the selling price. Required: 1. Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products. 2. Determine the carrying value of inventory, assuming the LCM rule is applied to the entire inventory. 3. Assuming inventory write-downs are common for Forest, record any necessary year-end adjusting entry based on the amount calculated in requirement 2. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Product (units) A (900) B (800) C (1,000) D (500) E (800) 11 13 21 Determine the carrying value of ending…arrow_forwardNico Corp, has compiled the following information related to its three products. Costs of disposal are estimated to be 10% of selling price, and gross profit is estimated to be 20% of the selling price. Determine the value on inventory applying the lower-of-cost-or-market rule to each individual inventory item. Round each amount to the nearest dollar. Estimated selling price Original cost (LIFO) Replacement cost Inventory at the lower-of- cost-or-market #1 $600 500 400 $ #2 $400 250 350 $ #3 $500 450 475 $arrow_forward
- Han Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Cost Selling price Costs to sell Product 1 Product 2 Product 3 $ 25 $ 55 55 85 5 15 Product Cost 1 2 3 Required: What unit values should Han use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory? $.95 135 50 NRV Per Unit Inventory Value A fire destroyed a warehouse of the Goren Group, Incorporated, on May 4, 2024. Accounting records on that date indicated the following: Estimated loss from fire Merchandise inventory, January 1, 2024 Purchases to date Freight-in Sales to date $ 1,970,000 5,870,000 470,000 8,900,000 The gross profit ratio has averaged 20% of sales for the past four years. Required: Use the gross profit method to estimate the cost of the inventory destroyed in the fire.arrow_forwardForester Company has five products in its inventory. Information about the December 31, 2021, inventory follows. Product Quantity UnitCost UnitReplacementCost UnitSellingPrice A 600 $ 30 $ 32 $ 36 B 1,000 35 31 38 C 900 23 22 28 D 800 27 24 26 E 700 34 32 33 The cost to sell for each product consists of a 10 percent sales commission. The normal profit for each product is 25 percent of the selling price.Required:1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products.2. Determine the carrying value of inventory at December 31, 2021, assuming the LCM rule is applied to the entire inventory.3. Assuming inventory write-downs are common for Forester, record any necessary year-end adjusting entry based on the amount calculated in requirement 2.arrow_forwardForest Company has five products in its inventory. Information about ending inventory follows. Unit Replacement Unit Selling Cost Price $23 Product Quantity 1,000 700 1,000 900 600 ABCDU А Unit Cost $17 22 10 14 21 The cost to sell for each product consists of a 15 percent sales commission. The normal profit for each product is 40 percent of the selling price. Required: 1. Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products. 2. Determine the carrying value inventory, assuming the LCM rule is applied to the entire inventory. 3. Assuming inventory write-downs are common for Forest, record any necessary year-end adjusting entry based on the amount calculated in requirement 2. Required 1 Required 2 Required 3 $19 18 9 11 19 Complete this question by entering your answers in the tabs below. Product (units) A (1,000) B (700) C (1,000) D (900) E (600) Determine the carrying value of ending inventory, assuming the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Chapter 6 Merchandise Inventory; Author: Vicki Stewart;https://www.youtube.com/watch?v=DnrcQLD2yKU;License: Standard YouTube License, CC-BY
Accounting for Merchandising Operations Recording Purchases of Merchandise; Author: Socrat Ghadban;https://www.youtube.com/watch?v=iQp5UoYpG20;License: Standard Youtube License