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Data on the physical inventory of Ashwood Products Company as of December 31 follow: Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Instructions Determine the inventory at cost as well as at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows: 1. Draw a line through the quantity and insert the quantity and unit cost of the last purchase. 2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase. 3. Total the cost and market columns and insert the lower of the two totals in the Lower of C or M column. The first item on the inventory sheet has been completed as an example.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 7, Problem 6PA
Textbook Problem
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Data on the physical inventory of Ashwood Products Company as of December 31 follow:

Chapter 7, Problem 6PA, Data on the physical inventory of Ashwood Products Company as of December 31 follow: Quantity and , example  1

Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows:

Chapter 7, Problem 6PA, Data on the physical inventory of Ashwood Products Company as of December 31 follow: Quantity and , example  2

Instructions

Determine the inventory at cost as well as at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows:

  1. 1. Draw a line through the quantity and insert the quantity and unit cost of the last purchase.
  2. 2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase.
  3. 3. Total the cost and market columns and insert the lower of the two totals in the Lower of C or M column. The first item on the inventory sheet has been completed as an example.

Chapter 7, Problem 6PA, Data on the physical inventory of Ashwood Products Company as of December 31 follow: Quantity and , example  3

To determine

Determine the value of inventory using first in first out method under lower-of-cost-or-market inventory.

Explanation of Solution

Lower-of-cost-or-market value is a method which requires the reporting of the ending merchandise inventory in the financial statement of a company, at its current market value (net realizable value) or at its historical cost price, whichever is less.

The above table shows the applying the lower-of-cost-or-market method to each inventory item (B12, E41, G19, L88, N94, P24, R66, T33 and Z16)...

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Chapter 7 Solutions

Financial Accounting
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