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Valuing Inventory at Lower-of-Cost-or-Market Management of Tarry Company takes the position that under the lower-of-cost-or-market rule, the two items below are reported in ending inventory
Valuing Inventory at Lower-of-Cost-or-Market
Management of Tarry Company takes the position that under the lower-of-cost-or-market rule, the two items below are reported in ending inventory at $66,400 (total). Inventory cost is reported using LIFO.
- Edgers: 1,200 in inventory; cost is $22 each; replacement cost is $16 each; estimated sale price is $30 each; estimated distribution cost is $3 each; and normal profit is 10% of sale price.
- Hedge clippers: 800 in inventory; cost is $50 each; replacement cost is $36 each; estimated sale price is $90 each; estimated distribution cost is $28 each; and normal profit is 20% of sale price.
a. Compute your inventory valuation by item and in total for the Tarry Company inventory reported above.
Inventory valuation for edgers | ||
Inventory valuation for hedge clippers |
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Total inventory valuation |
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b. Prepare the entry, if any, to report inventory at the lower-of-cost-or-market. Assume that all adjustments directly impact cost of goods sold and inventory.
Account Name | Dr. | Cr. | |
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