Lower of Cost or Market Palmquist Company has five different inventory items tha
ID: 2568346 • Letter: L
Question
Lower of Cost or Market
Palmquist Company has five different inventory items that it values by the lower of cost or market rule applied on an individual item basis. The normal markup on all items is 20% of cost. The following information is obtained from the company’s records:
25.3 Assume that Palmquist uses IFRS. Compute the correct inventory value under the lower of cost or market rule. Round your answers to the nearest cent.
Item Units Cost Replacement Cost Net Realizable Value 1 500 $10.00 $ 9.10 $ 9.20 2 400 8.00 8.10 7.80 3 300 15.00 13.50 14.00 4 200 18.00 12.00 17.00 5 100 25.00 25.5025.3 Assume that Palmquist uses IFRS. Compute the correct inventory value under the lower of cost or market rule. Round your answers to the nearest cent.
Item Lower of
Cost or Market 1 $ 2 3 4 5
Explanation / Answer
Answer:
Item
Units
Cost
Replacement cost
Net realizable value
Lower of cost or market
Total cost
1
500
$10
$9.10
$9.20
$9.20
$4600
2
400
8
8.10
7.80
7.80
3120
3
300
15
13.50
14
14
4200
4
200
18
12
17
17
3400
5
100
5
25.50
25.30
5
500
Item
Units
Cost
Replacement cost
Net realizable value
Lower of cost or market
Total cost
1
500
$10
$9.10
$9.20
$9.20
$4600
2
400
8
8.10
7.80
7.80
3120
3
300
15
13.50
14
14
4200
4
200
18
12
17
17
3400
5
100
5
25.50
25.30
5
500
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