ORIE_3150_Homework__4_answers - ORIE 3150 Homework#4 Spring...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ORIE 3150 Homework #4 Spring 2009 1. The Collins Company has five inventory items on hand. Collins has found that the items would need to be refurbished before they could be sold, and replacement costs of each of these items has changed. Collins needs to adjust the inventory cost of the items. Find the new cost for each item, and provide the journal entry needed to make the adjustment in their financial records. Item Number on hand Cost per unit Replacement Cost per unit Selling Price per unit Normal Profit per unit Refurbishing Costs per unit Foonbit 4 $50 $55 $100 $20 15 Grapple 8 100 90 120 24 20 Hook 14 80 70 85 17 20 Ibinger 8 90 37 100 20 24 Jackzoom 10 95 92 110 22 24 Answer: Recall the definitions: Net realizable value (NRV) – equals the estimated selling price in the ordinary course of business less costs of repair, preparation and disposal Net adjusted cost (NAC) – equals the NRV less a normal profit margin (NPM). NAC = NRV – NPM Replacement cost (RC) – replacement of inventory by purchase or reproduction. We find the market value using the middle value of the three (NRV, NAC, RC).
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/19/2009 for the course ORIE 315 taught by Professor Callister during the Spring '08 term at Cornell.

Page1 / 4

ORIE_3150_Homework__4_answers - ORIE 3150 Homework#4 Spring...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online