Sandals Company is preparing the annual financial statements dated December 31.

Question

Sandals Company is preparing the annual financial statements dated December 31. Ending inventory information about the four major items stocked for regular sale follows Unit Cost Quantity When Market Value Product Line n Hand Acquire(FIFO) at Year-End Air Flow Blister Buster Coolonite Dudesly 40 100 30 35 $17 30 80 20 $19 28 75 25 Required 1. Compute the amount that should be reported for the ending inventory using the LCM rule applied to each item. Ending Invento 2. How will the write-down of inventory to lower of cost or market affect the company's expenses reported for the year ended December 31? Cost of goods sold will be

Explanation / Answer

Ending inventory=

Sum of below items

40*17

100*28

30*75

35*20

Air flow= no write off

Blister Buster= (30-28)*100= 200

Coolonite= (80-75)*30= 150

Dudesly= no write off

COGS will be increased by 200+150= 350

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