Ch 9 Inventories: Additional Valuation Issues (BE1-9 &E1-6)
BE9-1 Presented below is information related to Rembrant Inc's inventory.
(per unit) Skis Boots parkas Historical cost $190 $106 $53 Selling price 212 145 73.75 Cost to distribute 19 8 2.50 Current replacement cost 203 105 51 Normal profit margin 32 29 21.25 Determine the following: a) the two limits to market value (i.e., the ceiling and the floor)that should be used in the lower-of-cost-market computation for risk, b) the cost amount that should be used to value the lower-of-cost-or-market comparison of boots, and c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
(a) Ceiling $193.00 ($212 – $19) Floor $161.00 ($212 – $19 – $32)

(b) $106.00

(c) $51.00 BE 9-2 Floyd Corporation has the following four items in it ending inventory. Item Cost Replacement cost Net Realizable value(NRV) NRV- Normal PM Jokers $2,000 $2,050 $2,100 $1,600 Penguins 5,000 5,100 4,950 4,100 Riddlers 4,400 4,550 4,625 3,700 Scarecrows 3,200 2,990 3,830 3,070 Determine the final lower-cost-or-market inventory value for each item. Item | |
Cost | | Designated Market | |
LCM | Jokers | | $2,000 | | $2,050 | | $2,000 | Penguins | | 5,000 | | 4,950 | | 4,950 | Riddlers | | 4,400 | | 4,550 | | 4,400 | Scarecrows | | 3,200 | | 3,070 | | 3,070 | BE 9-3 Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was $214,000 at both cost and market value. At December 31, 2014, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under a) the cost-of-goods-sold method and b) the loss method. (a) | Cost-of-goods-sold method | | | | Cost of Goods Sold