E7-11 Reporting Inventory at Lower of Cost or Market [LO 7-4] Sandals Company is

Question

E7-11 Reporting Inventory at Lower of Cost or Market [LO 7-4] Sandals Company is preparing the annual financial statements dated December 31. Ending inventory information about the four major items stocked for regular sale follows Quantity Unit Cost When Market Value on Hand Acquired (FIFO) Product Line Air Flow Blister Buster Coolonite Dudesly 20 75 35 10 at Year-End $14 38 50 35 $12 40 30 Required: 1. Compute the amount that should be reported for the ending inventory using the LCM rule applied to each itenm Ending Invento 2. How will the write-down of inventory to lower of cost or market affect the company's expenses reported for the vear ended December 31? Cost of goods sold will be

Explanation / Answer

Quantity on hand Unit cost when acquired Quantity on hand*Unit cost Market value at year end Quantity on hand*Market value LCM Air Flow 20 12 240 14 280 240 Blisters Busters 75 40 3000 38 2850 2850 Coolonite 35 55 1925 50 1750 1750 Dudesly 10 30 300 35 350 300 5465 5230 5140 Ending Inventory 5140 Cost of goods sold will increase by $ 325

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