Chapter 9 inventories Soll - EXERCISE 9-2(1015 minutes Net Realizable Value Less Normal Profit(Floor $70 60 45 45 60 40 Item D E F G H I Net Realizable

Chapter 9 inventories Soll - EXERCISE 9-2(1015 minutes Net...

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EXERCISE 9-2 (10–15 minutes) Item Net Realizable Value (Ceiling) Net Realizable Value Less Normal Profit (Floor) Replacement Cost Designated Market Cost LCM D $90* $70** $120 $90 $75 $75 E 80 60 72 72 80 72 F 65 45 70 65 80 65 G 65 45 30 45 80 45 H 80 60 70 70 50 50 I 60 40 30 40 36 36 *Estimated selling price – Estimated selling expense = $120 – $30 = $90. **Net realizable value – Normal profit margin = $90 – $20 = $70.
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EXERCISE 9-3 (15–20 minutes) Item No. Cost per Unit Replacement Cost Net Realizable Value Net Real. Value Less Normal Profit Designated Market Value Quantity Final Inventory Value 1320 $3.20 $3.00 $4.15* $2.90** $3.00 1,200 $ 3,600 1333 2.70 2.30 3.00 2.50 2.50 900 2,250 1426 4.50 3.70 4.60 3.60 3.70 800 2,960 1437 3.60 3.10 2.95 2.05 2.95 1,000 2,950 1510 2.25 2.00 2.45 1.85 2.00 700 1,400 1522 3.00 2.70 3.40 2.90 2.90 500 1,450 1573 1.80 1.60 1.75 1.25 1.60 3,000 4,800 1626 4.70 5.20 5.50 4.50 5.20 1,000 4,700 *** $24,110 *$4.50 – $.35 = $4.15. **$4.15 – $1.25 = $2.90. ***Cost is used because it is lower than designated market value. EXERCISE 9-4 (10–15 minutes) (a) 12/31/07 Cost of Goods Sold .............................. 19,000 Inventory ...................................... 19,000 12/31/08 Cost of Goods Sold .............................. 15,000 Inventory ...................................... 15,000 (b) 12/31/07 Loss Due to Market Decline of Inventory ............................................ 19,000 Allowance to Reduce Inventory to Market ................................... 19,000 12/31/08 Allowance to Reduce Inventory to Market ............................................ 4,000*
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Recovery of Loss Due to Market Decline of Inventory .... 4,000
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