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(1) Lower of Cost or Market Palmquist Company has five different inventory items that it values by the lower of cost or market rule applied

(1) Lower of Cost or Market

Palmquist Company has five different inventory items that it values by the lower of cost or market rule applied on an individual item basis. The normal markup on all items is 20% of cost. The following information is obtained from the companys records:

Item Units Cost Replacement Cost Net Realizable Value
1 500 $10.00 $ 9.10 $ 9.20
2 400 8.00 8.10 7.80
3 300 15.00 13.50 14.00
4 200 18.00 12.00 17.00
5 100 25.00 25.50 25.30

Required:

Assume that Palmquist uses the FIFO inventory valuation method. Compute the correct inventory value under the lower of cost or market rule. Round your answers to the nearest cent.

Item Lower of Cost or Market
1 $
2
3
4
5

Compute the total inventory value if the lower of cost or market is applied to each individual item.

$

Assume that Palmquist uses the LIFO inventory method. Compute the correct inventory value under the lower of cost or market rule. Round your answers to the nearest cent.

Item Lower of Cost or Market
1 $
2
3
4
5

Compute the total inventory value if the lower of cost or market is applied to each individual item.

$

Assume that Palmquist uses IFRS. Compute the correct inventory value under the lower of cost or market rule. Round your answers to the nearest cent.

Item Lower of Cost or Market
1 $
2
3
4
5

Assume that Palmquist uses IFRS. Compute the correct inventory value under the lower of cost or market rule.

$

Explain the differences between the inventory valuations reported under IFRS and U.S. GAAP. The inventory valuation reported under IFRS is the inventory valuation reported under U.S. GAAP. This difference arises because IFRS define market value as and do not consider . Therefore, IFRS will result in market values that are always greater than or equal to those reported under U.S. GAAP. Because some of the U.S. GAAP inventory (items 1, 3, and 4) was valued at either replacement cost or net realizable value minus a normal profit margin, the IFRS lower of cost or market valuation of inventory will be the U.S. GAAP inventory valuation.

(2) Retail Inventory Method

Turner Corporation uses the retail inventory method. The following information relates to 2016:

Cost Retail Cost Retail
Inventory, January 1 $ 29,000 $ 45,000 Additional markups $ 50,000
Purchases (gross price) 140,000 190,000 Markup cancellations 10,000
Purchases discounts taken 3,000 Markdowns 15,000
Purchases returns 5,000 8,000 Markdown cancellations 3,000
Freight-in 20,000 Net Sales 190,000
Employee discounts 3,000

Required:

1. Compute the cost of the ending inventory under each of the following cost flow assumptions: FIFO. Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

TURNER CORPORATION
Calculation of Ending Inventory by Retail Inventory Method FIFO
For the year 2016
Cost Retail
$ $
$ $
$ $
Ending inventory at retail $
Ending inventory at cost $

2. Compute the cost of the ending inventory under each of the following cost flow assumptions: Average cost. Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

TURNER CORPORATION
Calculation of Ending Inventory by Retail Inventory Method Average Cost
For the year 2016
Cost Retail
$ $
$
Ending inventory at retail $
Ending inventory at cost $

3. Compute the cost of the ending inventory under each of the following cost flow assumptions: LIFO. Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

TURNER CORPORATION
Calculation of Ending Inventory by Retail Inventory Method LIFO
For the year 2016
Cost Retail
$ $
$ $
$ $
$ $
Ending inventory at retail $
Ending inventory at cost $

4. Compute the cost of the ending inventory under each of the following cost flow assumptions: Lower of cost or market (based on average cost). Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

TURNER CORPORATION
Calculation of Ending Inventory by Retail Inventory Method Lower of Cost or Market (based on average cost)
For the year 2016
Cost Retail
$ $
$ $
Ending inventory at retail $
Ending inventory at LCM $

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