# Lower-of-cost-or-market inventory Data on the physical inventory of Ashwood Products Company as of December 31 follow: Inventory Item Inventory Quantity Market Value per Unit (Net Realizable Value) B12 38 \$ 57 E41 18 180 G19 33 126 L88 18 550 N94 400 7 P24 90 18 R66 8 250 T33 140 20 Z16 15 752 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 inventtory sheet has been completed as an example.

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

#### Solutions

Chapter
Section
Chapter 7, Problem 7.6APR
Textbook Problem

## Lower-of-cost-or-market inventoryData on the physical inventory of Ashwood Products Company as of December 31 follow: Inventory Item Inventory Quantity Market Value per Unit (Net Realizable Value) B12 38 \$ 57 E41 18 180 G19 33 126 L88 18 550 N94 400 7 P24 90 18 R66 8 250 T33 140 20 Z16 15 752 Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows:InstructionsDetermine 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 inventtory sheet has been completed as an example.

Expert Solution
To determine

Lower-of-cost-or-market value:

The 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.

To determine: value of inventory using first in first out method under lower-of-cost-or-market inventory.

### Explanation of Solution

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). As applied on an item-by-item basis, the total of lower-of-cost-or-market method is \$39,873, which is a market decline of \$1,225 (\$41,098 – \$39,873). This market decline of \$1,225 is included in cost of merchandise sold...

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