Part 1: Additional Inventory Issues

Question 1: Lower of Cost or Market (10 Points)

Jessicas uses the lower of cost-or-market method to price inventory. Jessica sells two items, Item A and Item B. Below is the relevant data for Inventory Items A and B at 12/31/20:

	Item A	Item B
Estimated Selling Expense	$2,500	$2,000
Cost	$3,750	$6,575
Normal Profit	$1,000	$2,250
Estimated Selling Price	$6,500	$10,000
Replacement Cost	$5,000	$6,000

(A) Assume Jessica applies the lower of cost-or-market method on an item-by-item basis. What is the value of Inventory that would be reported on Jessicas balance sheet at 12/31/20?

Show your work for Part 1, Question 1 (A) here ():

(B) Assume Jessica applies the lower of cost-or-market method on an entire inventory basis. What is the value of Inventory that would be reported on Jessicas balance sheet at 12/31/20?

Show your work for Part 1, Question 1 (B) here: