William Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2017. Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit A 1,800 $9.15 $10.25 $12.81 $1.83 $2.20 B 1,500 10.00 9.64 11.47 1.10 1.46 C 1,700 6.83 6.59 8.78 1.40 0.73 D 1,700 4.64 5.12 7.69 0.98 1.83 E 2,100 7.81 7.69 8.17 0.85 1.22 Jane Doe is an accounting clerk in the accounting department of William Co., and she cannot understand why the market value keeps changing from replacement cost to net realizable value to something that she cannot even figure out. Jane is very confused, and she is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant. 1. Calculate the lower-of-cost-or-market using the individual-item approach. 2. How much will Jane need to write down the entry by?
William Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2017. Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit A 1,800 $9.15 $10.25 $12.81 $1.83 $2.20 B 1,500 10.00 9.64 11.47 1.10 1.46 C 1,700 6.83 6.59 8.78 1.40 0.73 D 1,700 4.64 5.12 7.69 0.98 1.83 E 2,100 7.81 7.69 8.17 0.85 1.22 Jane Doe is an accounting clerk in the accounting department of William Co., and she cannot understand why the market value keeps changing from replacement cost to net realizable value to something that she cannot even figure out. Jane is very confused, and she is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant. 1. Calculate the lower-of-cost-or-market using the individual-item approach. 2. How much will Jane need to write down the entry by?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter6: Cost Of Goods Sold And Inventory
Section: Chapter Questions
Problem 50E: Inventory Costing Methods Crandall Distributors uses a perpetual inventory system and has the...
Related questions
Topic Video
Question
100%
William Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2017.
|
Item
|
Quantity
|
Unit Cost
|
Replacement
Cost/Unit |
Estimated Selling
Price/Unit |
Completion & Disposal
Cost/Unit |
Normal Profit
Margin/Unit |
||||||||||
| A | 1,800 | $9.15 | $10.25 | $12.81 | $1.83 | $2.20 | ||||||||||
| B | 1,500 | 10.00 | 9.64 | 11.47 | 1.10 | 1.46 | ||||||||||
| C | 1,700 | 6.83 | 6.59 | 8.78 | 1.40 | 0.73 | ||||||||||
| D | 1,700 | 4.64 | 5.12 | 7.69 | 0.98 | 1.83 | ||||||||||
| E | 2,100 | 7.81 | 7.69 | 8.17 | 0.85 | 1.22 |
Jane Doe is an accounting clerk in the accounting department of William Co., and she cannot understand why the market value keeps changing from replacement cost to net realizable value to something that she cannot even figure out. Jane is very confused, and she is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.
1. Calculate the lower-of-cost-or-market using the individual-item approach.
2. How much will Jane need to write down the entry by?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning