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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

Total inventory valuation

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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