In early March, Druggie, Inc. had 400 units of \"Crak\" in its inventory at a co

Question

In early March, Druggie, Inc. had 400 units of "Crak" in its inventory at a cost of $60 each. It purchased 600 more units of "Crak" in April at a cost of $90 each, then 200 more units were purchased toward the end of the year at a cost of $140 per unit. Sales of Crak skyrocketed beyond Druggie's expectations during the holidays. Druggie sold 1,000 units at a selling price of $200 each. The LIFO liquidation overstated normal gross profit by a. $28,000 b. $40,000 c. $46,000 d. $120,000 e $154,000 16 Wonder Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2013. Its inventory at that date was $550,000 and the relevant price 17. index was 100. Information regarding inventory for subsequent years is as follows: Inventory at t Pri Current Date December 31, 2014 December 31, 2015 December 31, 2016 $642,000 725,000 107 125 130 812,500 What is the cost of the ending inventory at December 31, 2016 under dollar-value LIFO? a. $647,500 b. $640,600 c. $637,000 d. $625,000 e $658,500 Wander Corp has unfinished inventory with a cost of $725,000. Replacement cost of the inventory is $710,000. The sales value is $1,000,000. Estimated cost to complete the inventory is $50,000. Estimated selling costs are $200,000. The normal profit margin is 5%, wander Corp uses lower-of-cost-or-net realizable value to report its inventory. At what amount should Wander's inventory be reported on the balance sheet? a. $665,000 b- $700,000 c. $710,000 d· $725,000 e. $750,000 18.

Explanation / Answer

16. the 1000 units sold comprise of 200 units purchased at the end of the year @ $140 each, 600 units purchased in April at $90 each and 200 units purchased in early March at $60 each. the 600 units and 200 units represent a layer liquidation. the effect of that is calculated by comparing the layer cost to the normal cost

46000

c. 46000

17.

18. Wander's inventory should be reported at $725000 which is lower then the net realizable value

Cost - $725000

NRV = $1,000,000 - (50000+200000) = $750,000

NRV > Cost , so the cost is used to report the inventory

Units Layer Cost Normal cost Difference Profit overstated 600 90 140 50 30000 200 60 140 80 16000

46000

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