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Determining inventory at lower of cost or market

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On the basis of the following data, determine the value of the inventory at the lower of cost or market. Assemble the data in the form illustrated in Exhibit 9.

Commodity         Inventory Quantity          Unit Cost Price           Unit Market Price

Buffal                       35                                $115                            $120

Dakota                     67                                90                                 75

Frontier                    8                                  300                               280

Midwest                    83                                 40                                30

Rainbow                   100                                90                                94

 EXHIBIT 9     Determining Inventory at Lower of Cost or Market

   In Exhibit 9, Items A, B, C, and D could be viewed as a class of inventory items. If the lower-of-cost-or-market method is applied to the class, the inventory would be valued at $15,472, which is a market decline of $48 ($15,520 -$15,472). Likewise, if Items A, B, C, and D make up the total inventory, the lower-of-cost-or-market method as applied to the total inventory would be the same amount, $15,472.

 (Warren 233-234)

Warren, Carl S. Survey of Accounting, 6th Edition. Cengage Learning, 02/2012. VitalBook file.

Reference no: EM13843613

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