Exercise 9-2 Smashing Pumpkins Company uses the lower-of-cost-or-market method,

Question

Exercise 9-2 Smashing Pumpkins Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I.

Item D

Item E

Item F

Item G

Item H

Item I

Using the lower-of-cost-or-market rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2014, for each of the inventory items above.

Item D

Item E

Item F

Item G

Item H

Item I

Estimated selling price $146 $134 $116 $110 $134 $110 Cost 92 98 98 98 61 44 Replacement cost 146 88 85 37 85 37 Estimated selling expense 37 37 37 31 37 37 Normal profit 24 24 24 24 24 24

Explanation / Answer

Lower of Cost or Market

The Condition for the determination of MArket value is

Item Historic Cost Replacement cost Ceiling(Estimated selling price - selling Expenses) Floor(NRV-NOrmal Profit) Market D 92 146 146-37 = 109 109-24 = 85 109 E 98 88 134-37 = 97 97-24=73 88 F 98 85 116-37=79 79-24=55 79 G 98 37 110-31 = 79 79-24=55 55 H 61 85 134-37= 97 97-24 = 73 85 I 44 37 110-37 =73 73-24 = 49 49

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.