Fiedler Co. follows the practice of valuing its inventory at the lower-of-cost-o
ID: 2476486 • Letter: F
Question
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
Greg 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.
A)Show the journal entry he will need to make in order to write down the ending inventory from cost to market.
Cost of Goods Sold Method:
The Loss Method:
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling Price/Unit
Completion & Disposal Cost/Unit
Normal Profit Margin/Unit
A 1,600 $19.28 $21.59 $26.99 $3.86 $4.63 B 1,300 21.07 20.30 24.16 2.31 3.08 C 1,500 14.39 13.88 18.50 2.96 1.54 D 1,500 9.77 10.79 16.19 2.06 3.86 E 1,900 16.45 16.19 17.22 1.80 2.57Explanation / Answer
Ans;
Product Ceiling Floor Market Cost LCM Quantity total A 23.13 18.5 21.59 19.28 19.28 1600 30848 B 21.85 18.77 20.3 21.07 20.3 1300 26390 C 15.54 14 14 14.39 14 1500 21000 D 14.13 10.27 10.79 9.77 9.77 1500 14655 E 15.42 12.85 15.42 16.45 15.42 1900 29298 Ceiling = selling price - disposal price Floor = ceiling - normal profit margin Market = replacement cost if current replacement cost >ceiling then ceiling is market if current replacement cost <floor then floor is marketRelated Questions
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