Exercise 9-7 Pharoah Company follows the practice of pricing its inventory at th

Question

Exercise 9-7

Pharoah Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis.

Item No.

Quantity

Cost per Unit

Cost to Replace

Estimated Selling Price

Cost of Completion and Disposal

Normal Profit

From the information above, determine the amount of Pharoah Company inventory.

Item No.

Quantity

Cost per Unit

Cost to Replace

Estimated Selling Price

Cost of Completion and Disposal

Normal Profit

1320 1,300 $3.23 $3.03 $4.55 $0.35 $1.26 1333 1,000 2.73 2.32 3.54 0.51 0.51 1426 900 4.55 3.74 5.05 0.40 1.01 1437 1,100 3.64 3.13 3.23 0.25 0.91 1510 800 2.27 2.02 3.28 0.81 0.61 1522 600 3.03 2.73 3.84 0.40 0.51 1573 3,100 1.82 1.62 2.53 0.76 0.51 1626 1,100 4.75 5.25 6.06 0.51 1.01

Explanation / Answer

Solution:

The amount of Pharoah Company’s inventory is $27,447

Item No. Cost per unit Replacement cost Net realizable value Net realizable value less normal profit Designated market value Quantity Final Market value 1320 3.23 3.03 4.2 2.94 3.03 1300 3939 1333 2.73 2.32 3.03 2.52 2.52 1000 2520 1426 4.55 3.74 4.65 3.64 3.64 900 4095 *** 1437 3.64 3.13 2.98 2.07 2.98 1100 3278 1510 2.27 2.02 2.47 1.86 2.02 800 1616 1522 3.03 2.73 3.43 2.92 2.92 600 1752 1573 1.82 1.62 1.77 1.26 1.62 3100 5022 1626 4.75 5.25 5.55 4.54 5.25 1100 5225 *** 27447 *4.55 - 0.35 *4.2 - 1.26 Designated market value is the middle value from replacement cost, net realizable value and net realizable value less normal profit. ***Cost is used because it is lower than designated market value

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