Kieso, Intermediate Accounting, 16e IGNMENT OURCES ded WP HW #7 (Ch Question 1 S

Question

Kieso, Intermediate Accounting, 16e IGNMENT OURCES ded WP HW #7 (Ch Question 1 Sheffield Company follows the 'practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis Cost per Cost to Selling Completion Normal Estimated Cost of Item No. Quantity Unit Replace 1320 2,000 $3.71 1333 1,700 1426 1,600 1437 1,800 4.18 1510 1,500 1522 1,300 1573 3,800 1626 1,800 Price and Disposal Profit $1.45 0.58 1.16 1.04 uestion 3 $3.48S $5.22 4.06 2.67 4.29 3.60 2.32 3.13 1.86 6.03 $0.41 0.58 0.46 0.29 0.93 0.46 0.87 0.58 3.13 5.22 3.71 3.77 4.41 2.90 6.96 uestion 8 2.61 3.48 2.09 5.45 0.58 0.58 1.16 uestion 11 uestion 12 ew Score From the information above, determine the amount of Sheffield Company inventory. ew Results by The amount of Sheffield Company's inventory Question Attemp

Explanation / Answer

Calculations and explanations:

1. If current replacement cost is between Ceiling(NRV) and floor value(NRV-normal profit) ,Market value = current replacement cost

2. If current replacement cost is Higher than Ceiling ,Market value = Ceiling value(NRV)

3. If current replacement cost is lower than floor value ,Market value = Floor value (NRV -normal profit)

Thus for item 1320 NRV = 5.22-0.41 = 4.81. This is the cieling. Floor = NRV - normal profit = 4.81-1.45 = 3.36

Current replacement cost = 3.48 and this is witin the cieling and floor. Hence market value = current replacement cost = 3.48

Similarly calculations have been done for all items.

Item NRV (selling price - cost of disposal). Ceiling Current replacement cost NRV - normal profit. Floor value Market cost lower of cost or market (A) Units (B) Total cost of inventory (A*B) 1320 4.81 3.48 3.36 3.48 3.71 3.48 2,000.00 6,960.00 1333 3.48 2.67 2.90 2.90 3.13 2.90 1,700.00 4,930.00 1426 5.34 4.29 4.18 4.29 5.22 4.29 1,600.00 6,864.00 1437 3.42 3.60 2.38 3.42 4.18 3.42 1,800.00 6,156.00 1510 2.84 2.32 2.14 2.32 2.61 2.32 1,500.00 3,480.00 1522 3.95 3.13 3.37 3.37 3.48 3.37 1,300.00 4,381.00 1573 2.03 1.86 1.45 1.86 2.09 1.86 3,800.00 7,068.00 1626 6.38 6.03 5.22 6.03 5.45 5.45 1,800.00 9,810.00 The amount of Sheffield Company's inventory 49,649.00

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