Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Compl
ID: 2415615 • Letter: I
Question
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling Price/Unit
Completion & Disposal Cost/Unit
Normal Profit Margin/Unit
(a)
Lower-of-Cost-or-Market
(Per unit basis)
B. Show the journal entry he will need to make in order to write down the ending inventry from the cost to market
Fiedler Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2014.Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling Price/Unit
Completion & Disposal Cost/Unit
Normal Profit Margin/Unit
A 1,300 $11.85 $13.27 $16.59 $2.37 $2.84 B 1,000 12.96 12.48 14.85 1.42 1.90 C 1,200 8.85 8.53 11.38 1.82 0.95 D 1,200 6.00 6.64 9.95 1.26 2.37 E 1,600 10.11 9.95 10.59 1.11 1.58Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.
Explanation / Answer
here is required the answer-
$12,640.00
Total of cost is $63,855 and market value is $56880 with a diff. of $6,975.
Entry would be
Loss from reducing inventory A/c Dr. $6,975
Allowance to reduce inventory to LCM cr. $6975
*LCM -lower of cost or market
Item Quantity Unit Cost Total Replacement Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit Selling price-completion-Margin Lower of cost or selling price Cost/Unit A 1,300 $11.85 $15,405.00 $13.27 $17,251.00 $16.59 $21,567.00 $2.37 $3,081.00 $2.84 $3,692.00 $14,794.00 $14,794.00 B 1,000 12.96 $12,960.00 12.48 $12,480.00 14.85 $14,850.00 1.42 $1,420.00 1.9 $1,900.00 $11,530.00 $11,530.00 C 1,200 8.85 $10,620.00 8.53 $10,236.00 11.38 $13,656.00 1.82 $2,184.00 0.95 $1,140.00 $10,332.00 $10,236.00 D 1,200 6 $7,200.00 6.64 $7,968.00 9.95 $11,940.00 1.26 $1,512.00 2.37 $2,844.00 $7,584.00 $7,584.00 E 1,600 10.11 $16,176.00 9.95 $15,920.00 10.59 $16,944.00 1.11 $1,776.00 1.58 $2,528.00 $12,640.00$12,640.00
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