Exercise 9-2 Smashing Pumpkins Company uses the lower-of-cost-or-market method,
ID: 2499123 • Letter: E
Question
Exercise 9-2
Smashing Pumpkins Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below.
Item D
Item E
Item F
Item G
Item H
Item I
Using the lower-of-cost-or-market rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2014, for each of the inventory items above.
Item D
Item E
Item F
Item G
Item H
Item I
Estimated selling price $172 $157 $136 $129 $157 $129 Cost 107 114 114 114 72 51 Replacement cost 172 103 100 43 100 43 Estimated selling expense 43 43 43 36 43 43 Normal profit 29 29 29 29 29 29Explanation / Answer
Under Lower of Cost or market value we Compare the Cost and Replacement cost whichever is less will be the value of item
Item Cost(A) Replacement cost(B) Least of A & B Value as on Dec 31,2014
D 107 172 107 $ 107
E 114 103 103 $ 103
F 114 100 100 $ 100
G 114 43 43 $ 43
H 72 100 72 $ 72
I 51 43 43 $ 43
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