Chapter 6, Problem 6SP

SERIAL PROBLEM

Business Solutions P2 A3

This serial problem began in Chapter 1 and continues through most of the book. If previous chapter segments were not completed, the serial problem can begin at this point.

SP 6

Part A

Santana Rey of Business Solutions is evaluating her inventory to determine whether it must be adjusted based on lower of cost or market rules. Business Solutions has three different types of software in its inventory, and the following information is available for each.

Inventory Items	Units	Cost per Unit	Market per Unit
Office productivity	3	$ 76	$ 74
Desktop publishing	2	103	100
Accounting	3	90	96

Required

Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or market rule to each product in inventory. Must Rey adjust the reported inventory value? Explain.

Part B

Selected accounts and balances for the three months ended March 31, 2020, for Business Solutions follow

Beginning inventory, January 1	$ 0
Cost of goods sold	14,052
Ending inventory, March 31	704

Required

1. Compute inventory turnover and days' sales in inventory for the three months ended March 31, 2020.

2. Assess the company's performance if competitors average 15 times for inventory turnover and 25 days for days' sales in inventory.