Question 6 Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price
ID: 2415888 • Letter: Q
Question
Question 6
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 Fiedler 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.
Show the journal entry he will need to make in order to write down the ending inventory from cost to market. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Question 6
Fiedler 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, 2014.Item
Quantity
Unit Cost
Replacement
Cost/Unit
Estimated Selling Price/Unit
Completion & Disposal Cost/Unit
Normal Profit Margin/Unit
A 1,300 $11.85 $13.27 $16.59 $2.37 $2.84 B 1,000 12.96 12.48 14.85 1.42 1.90 C 1,200 8.85 8.53 11.38 1.82 0.95 D 1,200 6.00 6.64 9.95 1.26 2.37 E 1,600 10.11 9.95 10.59 1.11 1.58
Greg Forda is an accounting clerk in the accounting department of Fiedler 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.
Show the journal entry he will need to make in order to write down the ending inventory from cost to market. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Cost of Goods sold Method: The Loss method:Explanation / Answer
Working Note: Calculation of Market Value
Note:
If the current replacement cost is between the floor and the ceiling, the current replacement cost is the market Value.
If the current replacement cost is greater than the ceiling, the ceiling amount is the market amount
If the current replacement cost is lower than the floor, the floor amount is the market amount.
Journal Entry
Items Cost Replacement cost Estimated Selling Price Completion & Disposal Cost Net Market Value (Estimated Selling Price Less Disposal Cost) Normal Profit A 11.85 13.27 16.59 2.37 14.22 2.84 B 12.96 12.48 14.85 1.42 13.43 1.9 C 8.85 8.53 11.38 1.82 9.56 0.95 D 6 6.64 9.95 1.26 8.69 2.37 E 10.11 9.95 10.59 1.11 9.48 1.58Related Questions
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