The Lecker company has five products in its inventory at December 31, 2013. Deta
ID: 2488871 • Letter: T
Question
The Lecker company has five products in its inventory at December 31, 2013. Details pertaining to these five items follow:
Product
Quantity
Unit cost
Unit sales price
Unit shipping and handling cost
a
2000
$10
$16
$2.5
b
1800
$15
$18
$1.5
c
1600
$14
$13
$0.5
d
900
$3
$8
$0.5
e
300
$7
$6
$1.00
There is a sales commission that must be paid on the unit sales price for each product. The commission rate is 10%.
Required:
1. Determine the book value of the inventory at December 31, 2013 assuming that the company applies the lower of cost and net realizable rule to each individual item in the inventory.
2. Determine the book value of the inventory at December 31, 2013 assuming that the company applies the lower of cost and net realizable rule to the entire inventory.
3. Assuming that the company reports an inventory write down as a separate line item in its income statement, determine the amount of the loss for requirments 1 & 2.
Product
Quantity
Unit cost
Unit sales price
Unit shipping and handling cost
a
2000
$10
$16
$2.5
b
1800
$15
$18
$1.5
c
1600
$14
$13
$0.5
d
900
$3
$8
$0.5
e
300
$7
$6
$1.00
Explanation / Answer
Answer:1
Answer:2
Answer:3 Loss:
LCM on individual basis-LCM on Entire inventory
=68400-74200
=5800
Product Quantity Unit cost Unit sales price Unit shipping and handling cost Selling comm NRV Total cost Total market value LCM (individual item) a 2000 $10 $16 $2.50 $1.60 $11.90 $20,000 $23,800.00 20000 b 1800 $15 $18 $1.50 $1.80 $14.70 $27,000 $26,460.00 26460 c 1600 $14 $13 $0.50 $1.30 $11.20 $22,400 $17,920.00 17920 d 900 $3 $8 $0.50 $0.80 $6.70 $2,700 $6,030.00 2700 e 300 $7 $6 $1.00 $0.60 $4.40 $2,100 $1,320.00 1320Related Questions
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