Question
original cost of the ending inventory is greater than the net realizable value, and thus the inventory has lost value. If the inventory has
original cost of the ending inventory is greater than the net realizable value, and thus the inventory has lost value. If the inventory has decreased in value below historical cost, then its carrying value is reduced and reported on the balance sheet. Rembrandt Company accountant is evaluating the ending inventory by the end of the year which is incomplete and categorized as work in progress. He has gathered following information related to inventory which will help in valuating the inventory based on Lower of the cost or market value. Cost per Cost to Est selling Item No Quantity unit replace Price Cost of completion Normal Profit 1220 1300 $3.20 $3.00 $4.50 $0.35 $1.25 1233 1000 $2.70 $2.30 $3.50 $0.50 $0.50 1410 800 $4.50 $3.70 $5.00 $0.40 $1.00 1439 3000 $3.60 $3.10 $3.20 $0.25 $0.90 1500 200 $2.25 $2.00 $3.25 $0.80 $0.60 1522 400 $3.00 $2.70 $3.80 $0.40 $0.50 1573 4000 $1.80 $1.60 $2.50 $0.75 $0.50 1626 1000 $4.70 $5.20 $6.00 $0.50 $1.00 1722 230 $5.50 $5.00 $8.00 $0.44 $1.22 1856 222 $6.60 $6.10 $7.50 $0.33 $1.40 1936 5000 $4.55 $4.00 $5.90 $0.22 $0.60 2155 700 $6.55 $5.90 $8.50 $0.23 $0.45 2222 780 $7.88 $7.00 $9.55 $0.44 $1.20 2456 677 $9.22 $8.50 $11.0 $0.22 $1.90 2555 5000 $3.33 $3.00 $6.00 $0.50 $0.45 2600 3300 $4.44 $4.10 $5.80 $0.22 $0.90 2777 400 $8.83 $8.20 $12.0 $0.45 $0.65 2884 780 $9.93 $9.20 $13.0 $0.35 $0.75 2900 566 $7.55 $7.10 $10.0 $0.55 $0.90 3011 9000 $6.55 $5.00 $8.00 $0.25 $1.20 Requirement (a) Determine the inventory as of Dec 31, 2014, by the lower of the cost and market value applying this method directly to each items. (b) Determine the inventory by the lower of the cost and market value applying the total of the inventory? (c) Relative sales method can also be used to valuate inventory by the end of month. Discuss in which situation this method can be adopted by the companies? You must support your answer with logical answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started