Search here for Tutorials

Loading...

Decker Company has five products in its inventory. Information about the December 31, 2011,

Decker Company has five products in its inventory. Information about the December 31, 2011,

P 9-1 Lower of cost or market. Decker Company has five products in its inventory. Information about the December 31, 2011,

ANSWER KEY P 9-1 Lower of cost or market


Decker Company has five products in its inventory. Information about the December 31, 2011, inventory follows.

Product                        Quantity           Unit Cost         Unit Replace Cost        Unit Selling Price
A                     1,000               $10                              $12                              $16
B                      800                  15                                11                                18
C                      600                  3                                  2                                  8
D                     200                  7                                  4                                  6
E                      600                  14                                12                              13

The selling cost for each product consists of a 15 percent sales commission. The normal profit percentage for each product is 40 percent of the selling price.

Required:
1. Determine the balance sheet inventory carrying value at December 31, 2011, assuming the LCM rule is applied to individual products.
2. Determine the balance sheet inventory carrying value at December 31, 2011, assuming the LCM rule is applied to the entire inventory. Also, assuming that Decker recognizes an inventory write-down as a separate income statement item, determine the amount of the loss.


CLICK HERE FOR THE SOLUTION