Information about the ending inventory of the Madisen Company at December 31, 20
ID: 2529579 • Letter: I
Question
Information about the ending inventory of the Madisen Company at December 31, 2017, has been provided to you by the company’s accounting personnel as follows:
Item
Quantity
Cost per Unit
Market Value per Unit
A
50
$10.00
$11.00
B
750
$3.00
$2.00
C
2,300
$5.00
$3.00
D
350
$16.00
$20.00
At what value will Madisen’s ending inventory be carried on the December 31, 2017 balance sheet under the lower of cost or market method applied to all inventory items together?
Item
Quantity
Cost per Unit
Market Value per Unit
A
50
$10.00
$11.00
B
750
$3.00
$2.00
C
2,300
$5.00
$3.00
D
350
$16.00
$20.00
Explanation / Answer
Ans. Amounts are in $
Total Cost of Inventory
Now lets calculate the market value of all inventory
So From Above analysis we can see that market value of inventories are only $15950 as compared to cost of $19850.
Lower of cost or market value is market value in this case
December 31'2017 Inventory will be carried at $15950.
Item Quantity Cost per unit Total cost A 50 $10 $500 B 750 $3 $2250 C 2300 $5 $11500 D 350 $16 $5600 Total cost for Inventory $19850