Lower-of-Cost-or-Market

Stalberg Company's beginning inventory and purchases during the fiscal year ended December 31, 20--, were as follows:

		Units	Unit Price		Total Cost
Jan. 1	Beginning inventory	10	$17		$170
Mar. 5	1st purchase	10	22		220
Sept. 9	2nd purchase	10	25		250
Dec. 8	3rd purchase	10	30		300
		40			$940

There are 10 units of inventory on hand on December 31.

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For the weighted-average method, round calculations to two decimal places. If required, round your final answers to the nearest cent.

1. Calculate the total amount to be assigned to the ending inventory under each of the following periodic inventory methods:

a. FIFO $fill in the blank d87639fbefa3001_1

b. Weighted-average $fill in the blank d87639fbefa3001_2

2. Assume that the market price per unit (cost to replace) of Stalberg's inventory on December 31, 20--, was $26. Calculate the total amount to be assigned to the ending inventory on December 31 under each of the following methods:

a. FIFO lower-of-cost-or-market $fill in the blank d87639fbefa3001_3

b. Weighted-average lower-of-cost-or-market $fill in the blank d87639fbefa3001_4

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Feedback

FIFO assumes that the oldest units have been sold and the newest or freshest units are in the ending inventory.

Weighted average is determined by dividing the total cost of units available for sale by the total number of units available for sale.

Calculate ending inventory at market and determine which amount should be shown on the company's balance sheet.

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3. What journal entry would be made under lower-of-cost-or-market for parts 2(a) FIFO and 2(b) Weighted-average? If no entry is required, select "No Entry Required".

a.	Gain on Write-Up of InventoryLoss on Write-Down of InventoryMerchandise InventoryNo Entry RequiredLoss on Write-Down of Inventory	Loss on Write-Down of Inventory	Loss on Write-Down of Inventory
	Gain on Write-Up of InventoryLoss on Write-Down of InventoryMerchandise InventoryNo Entry RequiredMerchandise Inventory	Merchandise Inventory	Merchandise Inventory
b.	Gain on Write-Up of InventoryLoss on Write-Down of InventoryMerchandise InventoryNo Entry RequiredNo Entry Required	No Entry Required	No Entry Required
	Gain on Write-Up of InventoryLoss on Write-Down of InventoryMerchandise InventoryNo Entry RequiredNo Entry Required	No Entry Required	No Entry Required