The following information was taken from the inventory records of the Peter Park
ID: 2504796 • Letter: T
Question
The following information was taken from the inventory records of the Peter Park Company:
Product
A
B
C
D
E
Replacement Cost
$4.00
$8.00
$7.00
$8.80
$2.50
Selling Price
$7.50
$10.00
$8.00
$10.00
$5.00
Selling Expenses
$1.00
$1.50
$2.50
$2.00
$0.50
Normal Profit
$2.00
$2.00
$1.00
$1.50
$1.50
Cost
$5.00
$9.00
$6.00
$7.50
$3.00
Units
200
400
350
450
500
Floor
Ceiling
Lower-of-cost-or-market
Required:
Determine the valuation of the inventory at the lower of cost or market applied to:
a.
individual items
b.
the inventory as a whole
Product
A
B
C
D
E
Replacement Cost
$4.00
$8.00
$7.00
$8.80
$2.50
Selling Price
$7.50
$10.00
$8.00
$10.00
$5.00
Selling Expenses
$1.00
$1.50
$2.50
$2.00
$0.50
Normal Profit
$2.00
$2.00
$1.00
$1.50
$1.50
Cost
$5.00
$9.00
$6.00
$7.50
$3.00
Units
200
400
350
450
500
Floor
Ceiling
Lower-of-cost-or-market
Explanation / Answer
a.
b. the inventory as a whole = 800+3200+1925+3375+=$10800
Product A B C D E Replacement Cost $4.00 $8.00 $7.00 $8.80 $2.50 Selling Price $7.50 $10.00 $8.00 $10.00 $5.00 Selling Expenses $1.00 $1.50 $2.50 $2.00 $0.50 Normal Profit $2.00 $2.00 $1.00 $1.50 $1.50 Cost $5.00 $9.00 $6.00 $7.50 $3.00 Units 200 400 350 450 500 Floor(Ceiling-profit) $4.50 $6.50 $4.50 $6.50 $3.00 Ceiling (Selling Price- Selling Expense) $6.50 $8.50 $5.50 $8.00 $4.50 Market amount $4.00 $8.00 $5.50 $8.00 $3.00 Lower-of-cost-or-market $4.00 $8.00 $5.50 $7.50 $3.00 Total cost of item $800.00 $3,200.00 $1,925.00 $3,375.00 $1,500.00Related Questions
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