Teal Mountain, Inc. values its inventory at the lower-of-LIFO-cost-or-market. Th

Question

Teal Mountain, Inc. values its inventory at the lower-of-LIFO-cost-or-market. The following information is available from the Estimated Price/Unit 16.24 10.32 36.60 22.97 16.18 Completion &Normal; Unit Replacement Selling Disposal Cost/Unit Profit Margin/Unit $3.94 2.09 10.44 6.67 1.28 Item Quantity Cost Cost/Unit X490 11,832 $14. 50 ×512 5,742 8.12 X682 20,880 22.04 Z195 14,500 16.53 9,97613.92 $13.86 8.70 21.58 16.24 14.79 $3.48 0.29 3.77 1.62 2.44 Z846 Calculate the lower-of-cost-or-market using the individual-item approach. Lower-of-Cost-or-Market (Per unit basis) x490 X512 ×682 X195 X846

Explanation / Answer

Item Quantity Unit Cost Replacement cost Estd. Selling price Compln.& disposal cost Ceiling/Upper limit NRV Normal profit margin Floor/Lower limit of NRV Replacememt compared with ceiling & floor Lower of MV & cost LCM COST 1 2 3 4 5 6 7=5-6 8 9=5-8 10=4& (7&9) 11= 3&10 2*11 2*3 X 490 11832 14.5 13.86 16.24 3.48 12.76 3.94 12.3 12.76 12.76 150976 171564 X 512 5742 8.12 8.7 10.32 0.29 10.03 2.09 8.23 8.7 8.7 49955 46625 X 682 20880 22.04 21.58 36.6 3.77 32.83 10.44 26.16 26.16 22.04 460195 460195 Z 195 14500 16.53 16.24 22.97 1.62 21.35 6.67 16.3 16.3 16.3 236350 239685 Z 846 9976 13.92 14.79 16.18 2.44 13.74 1.28 14.9 14.79 13.92 138866 138866 1036343 1056935 Amt. to write -down 20592 20592 (1056935-1036343) Journal entries COGS 20592 Inventory 20592 OR, under loss method, Loss on Inventory write-down 20592 Inventory 20592

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