Splish Brothers, Inc. values its inventory at the lower-of-LIFO-cost-or-market.
ID: 2510986 • Letter: S
Question
Splish Brothers, Inc. values its inventory at the lower-of-LIFO-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2017.
Profit Margin/Unit $3.81 2.02 10.08 6.44 1.23 Unit Repiacement Selling Disposal Cost/Unit Item Quantity Cost X490 X512 X682 Z195 Z846 Cost/Unit 11,424 $14.00 7.84 20,160 21.28 14,000 15.96 9,632 13.44 $13.38 8.40 20.83 15.68 14.28 Price/Unit $15.68 9.97 35.34 22.18 15.62 $3.36 0.28 3.64 1.57 2.35 5,544 Calculate the lower-of-cost-or-market using the individual-item approach Lower-of-Cost-or-Market (Per unit basis) X490 X512 X682 X195 X846 Show the journal entries Splish Brothers, Inc. will need to make in order to write down the ending inventory from cost to market. Assume this is Splish Brothers's first year of operations. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Account Titles and Explanation Debit Credit Goods sold Method:Explanation / Answer
Lower of cost or Market: (Per unit basis)
Item
Unit Cost in $
Market Value=Selling Price(-)Disposal Cost
Lower of unit Cost & Market Value
X490
14
15.68-3.36 =12.32
12.32
X512
7.84
9.97-0.28=9.69
7.84
X682
21.28
35.34-3.64=31.7
21.28
Z195
15.96
22.18-1.57=20.61
15.96
Z846
14.28
15.62-2.35=13.27
13.27
Splish Brothers Inc:
Item
Loss per unit (A)
Quantity (B)
Loss (A)*(B)
X490
14-12.32=1.68
11,424
19,192.32
Z846
14.28-13.27=1.01
9,632
9,728.32
Total
28,920.64
Cost of Goods Sold Method:
Cost of Goods sold a/c Dr 28,920.64
To Inventory 28,920.64
Loss Method:
Loss on Inventory write down a/c Dr 28,920.64
To Inventory 28,920.64
Item
Unit Cost in $
Market Value=Selling Price(-)Disposal Cost
Lower of unit Cost & Market Value
X490
14
15.68-3.36 =12.32
12.32
X512
7.84
9.97-0.28=9.69
7.84
X682
21.28
35.34-3.64=31.7
21.28
Z195
15.96
22.18-1.57=20.61
15.96
Z846
14.28
15.62-2.35=13.27
13.27
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