11960a LCM - Lower-of-Cost-or-Market for Inventories[11960a Brian Company had 400 units of inventory on hand at January 1 Year 3 These units had all

# 11960a LCM - Lower-of-Cost-or-Market for Inventories[11960a...

• Homework Help
• AIKOLI
• 1

This preview shows page 1 out of 1 page.

Lower-of-Cost-or-Market for Inventories:[11960a]Brian Company had 400 units of inventory on hand at January 1, Year 3. These units hadall been purchased on December 28, Year 1 at a cost of \$30 per unit. There had been no other purchases in Year 1 and no sales occurred in that year.Assume the following purchases (+) and sales (-) transactions occur in Year 3 and in Year 4 in the same order as presented.Year 3Year 4-200 units @ \$70+450 units @ \$35+450 Units @ \$25- 400 units @ \$ 75- 300 units @ \$80+600 units @ \$40-250 units @ \$90-300 units @ \$80The firm’s ending retail value of inventory equals the lastsales price per unit in both years.The firm’s ending replacement cost per unit equals the last purchase cost in each year.The firm’s selling costs average 20% of the sales price [excludes cost of goods sold].The firm’s normal profit on sales equals 66 2/3% in Year 3 and 54% in Year 4.The firm uses periodic FIFO.Required:Determine the values for ending inventory using the following concepts at the ends of both years. Year 3Year 4Cost Basis [Periodic FIFO]\$25\$40Replacement Cost\$25\$40Net Realizable Value [NRV]\$72\$64NRV Less Normal Profit\$12\$20.80