1. Sandhill Distribution Co. has determined its December 31, 2017 inventory on a
ID: 2437139 • Letter: 1
Question
1. Sandhill Distribution Co. has determined its December 31, 2017 inventory on a FIFO basis at $1052000. Information pertaining to that inventory follows:
$1100000
48000
128000
972000
Sandhill records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2017, the loss that Sandhill should recognize is
2. Concord Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2016. Its inventory at that date was $1050000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:
What is the cost of the ending inventory at December 31, 2019 under dollar-value LIFO?
3. Transactions for the month of June were:
Assuming that perpetual inventory records are kept in dollars, the ending inventory on a LIFO basis is
$1100000
Estimated cost of disposal48000
Normal profit margin128000
Current replacement cost972000
Explanation / Answer
Sandhill Distribution Co.
Answer: S80000
1. Net realizable value = Estimated selling price – Estimated cost of disposal = $1100000 - $48000 = $1052000
2. Current replacement cost = $972000
3. Net realizable value – Normal profit margin = $1052000 - $128000 = $924000
Market = Current replacement cost = $972000
Since the market price of $972000 is lower than the cost $1052000, loss is recorded to the tune of $1052000 - $972000 = $80000.
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