$ The inventory of Oheto Company on December 31, 2013, consists of the following
ID: 2380899 • Letter: #
Question
$ The inventory of Oheto Company on December 31, 2013, consists of the following items.Part No. Quantity Per Unit
Cost Market Total Cost Total
Market Lower of
Cost or
Market 110 670 $101 $106.00 $67,670 $71,020 ? 111 1,020 64 55.00 $65,280 $56,100 ? 112 570 85 81.00 $48,450 $46,170 ? 113 300 180 191.00 $54,000 $57,300 ? 120 440 217 220.00 $95,480 $96,800 ? 121 1,620 17 15.00 $27,540 $24,300 ? 122 350 254 $249.00 $88,900 $87,150 ? Totals
$447,320 $438,840 ?
Part No. 121 is obsolete and has a realizable value of each as scrap: $0.50
(a) Determine the inventory as of December 31, 2013, by the lower-of-cost-or-market method, applying this method directly to each item.
Inventory as of December 31, 2013
$
(b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.
Inventory as of December 31, 2013
$
Determine the inventory as of December 31, 2013, by the lower-of-cost-or-market method, applying this method directly to each item. Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.
Explanation / Answer
(a) Determine the inventory as of December 31, 2013, by the lower-of-cost-or-market method, applying this method directly to each item.
Inventory as of December 31, 2013 = 67670 + 56100+46170 +54000+95480+ (0.5 x 1620 )+87150 =
67670 + 56100+46170 +54000+95480+ 810+87150 = $407380
(b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.
Market value of part 121 = 1620 x 0.5 = 810
Hence, Market cost total = $438,840 + 810 - $24,300 = $415350 < $447,320
Hence,
Inventory as of December 31, 2013 = $415350
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