Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Compl
ID: 2499871 • 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)
Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling Price/Unit
Completion & Disposal Cost/Unit
Normal Profit Margin/Unit
A 1,700 $11.78 $13.19 $16.49 $2.36 $2.83 B 1,400 12.87 12.40 14.76 1.41 1.88 C 1,600 8.79 8.48 11.30 1.81 0.94 D 1,600 5.97 6.59 9.89 1.26 2.36 E 2,000 10.05 9.89 10.52 1.10 1.57Greg 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
Valuation of Inventory Quantity Unit cost Replacement Cost Estimated Selling Pice (a) Completion & Disposal cost per unit (b) Normal profit margin Net Realisable Value (NRV )=(a)-(b) Valuation A 1700 11.78 13.19 16.49 2.36 2.83 14.13 11.78 B 1400 12.87 12.4 14.76 1.41 1.88 13.35 12.87 C 1600 8.79 8.48 11.3 1.81 0.94 9.49 8.79 D 1600 5.97 6.59 9.89 1.26 2.36 8.63 5.97 E 2000 10.05 9.89 10.52 1.1 1.57 9.42 9.42 If NRV less than Cost then lower of NRV or Replacement & in All othet cases valuation shall be at cost
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