Sandals Company is preparing the annual financial statements dated December 31.

Question

Sandals Company is preparing the annual financial statements dated December 31. Ending inventory is presently recorded at its total cost of $13,775. Information about its inventory items follows Value at Year-End $87 Product Line Air Flow Blister Buster Coolonite Dudesly Quantity on Hand 90 10 20 75 Unit Cost When Acquired (FIFO) $ 85 10 20 75 16 78 Required: 1. Compute the LCM/NRV write-down per unit and in total for each item in the table. Also compute the total overall write-down for all items year ended December 31? item 2. How will the write-down of inventory to lower of cost or market/net realizable value affect the company's expenses reported for the 3. Compute the amount that should be reported for the inventory on December 31, after the LCM/NRV rule has been applied to each Complete this question by entering your answers in the tabs below Required 1 Required 2 Required3 Compute the LCM/NRV write-down per unit and in total for each item in the table. Also compute the total overall write-down for all items Quantity on Hand Write-downTotal Write- roduct Line Air Flow Blister Buster Coolonite Dudesly Total per item down 90 20

Explanation / Answer

1 Product Line Quantity on Hand Write-down per item Total Write-down Air Flow 90 - Blister Buster 10 10-4 = 6 10*6 = 60 Coolonite 20 20-16 = 4 20*4 = 80 Dudesly 75 - Total 140 There is increase in the value at the year end. Hence, there is no write down. The inventory should be valued at lower of cost or NRV. As the cost is lower, there is no write down 2 Cost of goods sold will increase by 140 3 Written down inventory: Product Line Quantity on Hand Value at year end per item Total value Air Flow 90 85 7650 Blister Buster 10 4 40 Coolonite 20 16 320 Dudesly 75 75 5625 Total 13635

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