Carla Co. follows the practice of valuing its inventory at the lower-of-cost-or-

Question

Carla Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2017.

Item

Quantity

Unit Cost

Replacement
Cost/Unit

Estimated Selling
Price/Unit

Completion & Disposal
Cost/Unit

Normal Profit
Margin/Unit

Greg Forda is an accounting clerk in the accounting department of Carla Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.

Item

Quantity

Unit Cost

Replacement
Cost/Unit

Estimated Selling
Price/Unit

Completion & Disposal
Cost/Unit

Normal Profit
Margin/Unit

A 1,400 $8.48 $9.49 $11.87 $1.70 $2.03 B 1,100 9.27 8.93 10.62 1.02 1.36 C 1,300 6.33 6.10 8.14 1.30 0.68 D 1,300 4.29 4.75 7.12 0.90 1.70 E 1,700 7.23 7.12 7.57 0.79 1.13 (a) Your answer is partially correct. Try again. Calculate the lower-of-cost-or-market using the individual-item approach Lower-of-Cost-or-Market (Per unit basis) Item A 8.14 Item B 8.24 Item C 6.10 Item D 4.29 Item E 5.65 Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Item Unit Cost Replacement Cost/Unit NRV NRV less Normal Profit Market Lower of cost or market A 8.48 9.49 10.17 8.14 9.49 8.48 B 9.27 8.93 9.6 8.24 8.93 8.93 C 6.33 6.1 6.84 6.16 6.16 6.16 D 4.29 4.75 6.22 4.52 4.75 4.29 E 7.23 7.12 6.78 5.65 6.78 6.78

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