Simmons Company has the following information about its ending inventory. It val
ID: 2559346 • Letter: S
Question
Simmons Company has the following information about its ending inventory. It values its inventory on an individual-item basis. Determine the value of the ending inventory. Show your work.
Item
Quantity
Cost
Estimated Selling Price
Cost to Complete and Sell
A
700
$2.25
$3.25
$1.40
B
500
3.00
3.90
0.80
C
3,000
1.80
2.50
1.20
D
1,000
4.70
6.00
1.50
Item
Quantity
Cost
Estimated Selling Price
Cost to Complete and Sell
A
700
$2.25
$3.25
$1.40
B
500
3.00
3.90
0.80
C
3,000
1.80
2.50
1.20
D
1,000
4.70
6.00
1.50
Explanation / Answer
Solution:
Ending Inventories are valued at cost or realizable value whichever is lower.
Here, Cost is the cost at which inventories are purchased originally.
Net Realizable Value = Estimated Selling Price – Cost to complete and sell the product
Item
Quantity
Cost per unit
Net Realizable Value per unit (Selling Price - Cost to complete and sell)
Lower of Cost or Net Realizable Value
Value of Ending Inventory
(X)
(P)
(X*P)
A
700
$2.25
$1.85
$1.85
$1,295
B
500
$3.00
$3.10
$3.00
$1,500
C
3000
$1.80
$1.30
$1.30
$3,900
D
1000
$4.70
$4.50
$4.50
$4,500
$11,195
Value of Ending Inventory = $11,195
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Item
Quantity
Cost per unit
Net Realizable Value per unit (Selling Price - Cost to complete and sell)
Lower of Cost or Net Realizable Value
Value of Ending Inventory
(X)
(P)
(X*P)
A
700
$2.25
$1.85
$1.85
$1,295
B
500
$3.00
$3.10
$3.00
$1,500
C
3000
$1.80
$1.30
$1.30
$3,900
D
1000
$4.70
$4.50
$4.50
$4,500
$11,195
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