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Concept explainers
Lower-of-cost-or-market inventory
Data on the physical inventory of Katus Products Co. as of December 31 follows:
Description | Inventory Quantity | Market Value per Unit (Net Realizable Value) |
A54 | 37 | $ 56 |
C77 | 24 | 178 |
F66 | 30 | 132 |
H83 | 21 | 545 |
K12 | 375 | 5 |
Q58 | 90 | 18 |
S36 | 8 | 235 |
V97 | 140 | 20 |
Y88 | 17 | 744 |
Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows:
Description | Last Purchases Invoice | Next-to-the-Last Purchases Invoice | ||
Quantity Purchased | Unit Cost | Quantity Purchased | Unit Cost | |
A54 | 30 | $ 60 | 40 | $ 58 |
C77 | 25 | 174 | 15 | 180 |
F66 | 20 | 130 | 15 | 128 |
H83 | 6 | 547 | 15 | 540 |
K12 | 500 | 6 | 500 | 7 |
Q58 | 75 | 25 | 80 | 26 |
S36 | 5 | 256 | 4 | 260 |
V97 | 100 | 17 | 115 | 16 |
Y88 | 10 | 750 | 8 | 740 |
Instructions
Determine the inventory at cost and also at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows:
1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase.
2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase.
3. Total the cost and market columns and insert the lower of the two totals in the LCM column. The first item on the inventory sheet has been completed as an example.
Inventory Sheet December 31 | ||||||
Description | Unit Inventory Quantity | Cost per Unit | Market Value per Unit(Net Realizable Value) | Total | ||
Cost | Market | LCM | ||||
A54 | 37 30 | $60 | $56 | $1,800 | $1,680 | |
7 | 58 | 56 | 406 | 392 | ||
$2,206 | $2,072 | $2,072 |
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Chapter 6 Solutions
Financial & Managerial Accounting
Additional Business Textbook Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Principles of Microeconomics (MindTap Course List)
Marketing: An Introduction (13th Edition)
Foundations Of Finance
Intermediate Accounting (2nd Edition)
Horngren's Accounting (12th Edition)
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