1. Data related to the inventories of Kristy’s Krafts is presented below: Books
ID: 2486704 • Letter: 1
Question
1. Data related to the inventories of Kristy’s Krafts is presented below: Books Art Pads Jewelry Paints Selling price 180,000 140,000 120,000 60,000 Cost 128,000 133,000 90,000 45,000 Replacement cost 120,000 130,000 110,000 41,000 Sales commission 10% 10% 10% 10% In applying the lower of cost and net realizable value rule: a. the inventory of books would be valued at b. the inventory of art pads would be valued at c. the inventory of jewelry would be valued at
2. On July 8, a fire destroyed the entire merchandise inventory on hand of Masters Gardening. The following information is available: Sales, January 1 through July 8 700,000 Inventory, January 1 130,000 Purchases, January 1 through July 8 640,000 Gross profit ratio 30% What is the estimated inventory on July 8 immediately prior to the fire?
Explanation / Answer
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Particulars Books Art Pads Jewellary Paints Selling price $180,000 $140,000 $120,000 $60,000 Cost 128,000 133,000 90,000 45,000 Replacement cost 120,000 130,000 110,000 41,000 Sales commission 10% 10% 10% 10% Net realizable value(Selling Price-Cost to Sell) $162,000 $126,000 $108,000 $54,000 Replacement cost $120,000.00 $130,000.00 $110,000.00 $41,000.00 Cost of Inventory (FIFO) $128,000.00 $133,000.00 $90,000.00 $45,000.00 Reported value or Book Value $120,000.00 $126,000.00 $90,000.00 $41,000.00 Reported or Book value of Inventory will be lower of cost or replacement coast as per the US GAAP. Provided replacement cost shall be lower than the NRV a. the inventory of books would be valued at As per the above Explanation Books will be valued at replacement cost. i.e $120,000 b. the inventory of art pads would be valued at As per the above Explanation Art Pads will be valued at NRV . i.e $126,000 (Since Replacement cost is > NRV) c. the inventory of jewelry would be valued at As per the above Explanation Jewellery will be valued at Cost. i.e $90,000
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