QUESTION 6 Not yet answered Marked out of 1.00 Departures from Acquisition Cost

Question

QUESTION 6 Not yet answered Marked out of 1.00 Departures from Acquisition Cost ending inventory PFlag question e the proper total inventory value for each of the following items in Viking Company's a. Viking has 600 video games in stock. The games cost $36 each, but their year-end replacement cost is $30. Viking has been selling the games for $60, but competitors are now selling them for $50. Viking plans to drop its price to $50. Viking's normal gross profit on video games is 40%. b. Viking has 300 rolls of camera film that are past the expiration date marked on the film's box. The films cost $1.65 each and are normally sold for $3.30. New replacement films still cost $1.65. To clear out these old films, Viking will drop their selling price to $1.40. There are no related selling costs. c. Viking has 5 cameras in stock that have been used as demonstration models. The cameras cost $180 and normally sell for $280. Because these cameras are in used condition, Viking has set the selling price at $160 each. Expected selling costs are $10 per camera. New models of the camera (on order) will cost Vikings $200 and will be priced to sell at $320 a. $ b. $ C. $

Explanation / Answer

Solution a:

Cost = $36 per game

Replacement cost = $30 per game

Floor price = Selling price - Gross Profit = $50 - $50*40% = $30

As NRV floor price is lower than cost, therefore inventory will be valued at $30

Value of inventory = 600*$30 = $18,000

Solution b:

Cost of film = $1.65

Replacement cost = $1.65

NRV = $1.40

As NRV is lesser than cost therefore inventory to be valued at NRV

Value of inventory = 300 * $1.40 = $420

Solution c:

Cost of camera = $180

NRV of camera = $160 - $10 = $150

Inventory to be value at NRV as same is lesser than cost = 5 * $150 = $750

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