4 Lynn Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows: Product Product 2 Historical cost Replacement cost Estimated cost to dispose/complete Estimated selling price $30 27 13 60 $15 35 In pricing its ending inventory using the lower of cost or market, what unit values should Lynn use for products #1 and #2, respectively? a. $15.00 and $29.00 b. $19.50 and $29.00 c. $19.50 and $30.00 d. $18.00 and $27.00

4 Lynn Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows: Product Product 2 Historical cost Replacement cost Estimated cost to dispose/complete Estimated selling price $30 27 13 60 $15 35 In pricing its ending inventory using the lower of cost or market, what unit values should Lynn use for products #1 and #2, respectively? a. $15.00 and $29.00 b. $19.50 and $29.00 c. $19.50 and $30.00 d. $18.00 and $27.00

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 2E: Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of...

See similar textbooks

Similar questions

Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows:
Using the following data, how should the inventory be valued under lower of cost or market? Original cost 1,350 Estimated selling price 1,475 Selling expenses 180
Using the following data, how should the inventory be valued under lower of cost or market? Original cost 1,350 Estimated selling price 1,475 Selling expenses 180
Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows: Inventory Write-Down Use the information in E8-1. Assume that Stiles uses the LIFO cost flow assumption and is applying the LCM rule. Required: 1. What is the correct inventory value for each product? 2. Next Level With regard to requirement 1, what effect does the imposition of the constraints on market value have on the inventory valuations?
Lower of Cost or Market Garcia Company uses FIFO, and its inventory at the end of the year was recorded in the accounting records at $17,800. Due to technological changes in the market, Garcia would be able to replace its inventory for $16,500. Required: 1. Using the lower of cost or market method, what amount should Garcia report for inventory on its balance sheet at the end of the year? 2. Prepare the journal entry required to value the inventory at the lower of cost or market.
Kulsrud Company would like to estimate the current inventory level. Using the gross profit method and the following information, estimate the current inventory level for Kulsrud Company. Goods available for sale 100,000 Net sales 150,000 Normal gross profit as a percent of sales 40%
Lower of Cost or Market Shaw Systems sells a limited line of specially made products, using television advertising campaigns in large cities. At year end, Shaw has the following data for its inventory: Required: 1. Compute the carrying value of the ending inventory using the lower of cost or market rule applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market. 3. CONCEPTUAL CONNECTION What is the impact of applying the lower of cost or market rule on the financial statements of the current period? What is the impact on the financial statements of a subsequent period in which the inventory is sold?
Effects of Inventory Costing Methods Refer to your answers for Filimonov Inc. in Cornerstone Exercises 6-22 through 6-24. Required: 1. In a period of rising prices, which inventory costing method produces the highest amount for ending inventory? 2. In a period of rising prices, which inventory costing method produces the highest net income? 3. In a period of rising prices, which inventory costing method produces the lowest payment for income taxes? 4. In a period of rising prices, which inventory method generally produces the most realistic amount for cost of goods sold? For inventory? Would your answer change if inventory prices were decreasing during the period?
Sienna Company uses the FIFO cost flow assumption. Sierra has inventory with a selling price of 100, packaging costs of 5, and transportation costs of 10. Siennas normal profit margin is 20. However, due to limited supply of the product from the manufacturer, it would cost Sienna 80 to replace the inventory. What amount should be used as the market value? a. 65 b. 80 c. 85 d. 100
Lower of Cost or Market Merediths Appliance Store has the following data for the items in its inventory at the end of the accounting period: Required: 1. Compute the carrying value of Merediths ending inventory using the lower of cost or market rule applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market. 3. CONCEPTUAL CONNECTION What is the conceptual justification for valuing inventory at the lower of cost or market?
Banwood Company has the following information for 20x1: There were no beginning inventories. What is the ending inventory for Banwood using the absorption costing method? a. 300,000 b. 180,000 c. 120,000 d. 80,000
Effects of Inventory Costing Methods Refer to the information for Tyler Company above. Required: 1. Which inventory costing method produces the highest amount for net income? 2. Which inventory costing method produces the lowest amount for taxes? 3. Which inventory costing method produces the highest amount for ending inventory? 4. How would your answers to Requirements 1-3 change if inventory prices declined during the period?