Chapter 6, Problem 6.6BPR

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