inventory_solution - Under GAAP, three methods are allowed:...

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Solution : Lower-of-cost-or-market (using FIFO cost) The Collins Company has five inventory items on hand at the end of 2010. Part # FIFO Cost Replacement cost LCM value 101 50,000 65,000 50,000 102 100,000 90,000 90,000 Total 1xx’s 150,000 155,000 201 80,000 65,000 65,000 202 90,000 56,000 56,000 203 95,000 86,000 86,000 Total 2xx’s 265,000 207,000 Total (all) 415,000 362,000 347,000 Required: Determine the ending inventory after applying the lower-of-cost-or-market method. $347,000 . Note: The tax code requires that the comparison be made on an item-by-item basis.
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Unformatted text preview: Under GAAP, three methods are allowed: (1) item-by-item, (2) major inventory groups (e.g., cost of 100s vs. market of 100s), or aggregate inventory. Also, remember that the tax code places a higher burden on the taxpayer before inventory can be written down. Obsolete or other slow moving inventory cannot be written down below replacement cost unless (1) the selling price is reduced & the items are offered for sale to customers, or (2) the inventory is destroyed or otherwise disposed of....
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This note was uploaded on 09/09/2011 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

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