York Co. sells one product, which it purchases from various suppliers. York's trial balance at December 31, 2018, included the following accounts:

Sales (33,000 units @ $16) ........................ $528,000

Sales discounts ...................................... 7,500

Purchases ............................................ 368,900

Purchase discounts .................................18,000

Freight-in ............................................. 5,000

Freight-out ..........................................11,000

York Co.'s inventory purchases during 2018 were as follows:

Additional Information:
a. York's accounting policy is to report inventory in its financial statements at the lower of cost or net realizable value, applied to total inventory. Cost is determined under the first-in, first-out (FIFO) method.
b. York has determined that, at December 31, 2018, the net realizable value was $8.00 per unit.
Required:
1. Prepare York's schedule of cost of goods sold, with a supporting schedule of ending inventory. York includes inventory write-down losses in cost of goods sold.
2. Explain the rule of lower of cost or net realizable value and its application in this situation.

Transcribed Image Text:

Beginning inventory Purchases, quarter ended March 31 Purchases, quarter ended June 30 Purchases, quarter ended September 30 Purchases, quarter ended December 31 Units 7,000 13,000 15,000 12,000 8,000 55,000 Cost per Unit 7.70 7.50 7.90 8.25 8.20 Total Cost S 53,900 97,500 118,500 99,000 65,600 $434,500