INTERMEDIATE ACCOUNTING1 CHAPTER 9 PROBLEMS Problem 1 The December 31, 2017 inve

Question

INTERMEDIATE ACCOUNTING1 CHAPTER 9 PROBLEMS Problem 1 The December 31, 2017 inventory of Gwynn Company consisted of four products, for which certain information is provided below. Replacement Estimated Expected Normal Proft Selling Priceon Sales CostDisposal Cost $22.00 Original Cost $24.00 $42.00 $120.00 $19.00 Product S6.50 $10.00 $25.00 $4.00 S40.00 S48.00 $190.00 $26.00 20% 25% 30% 10% S40.00 $115.00 $15.80 Instructions: Using the lower-of-cost-or-market approach applied on an individual-item basis, compute the inventory valuation that should be reported for each product on December 31, 201

Explanation / Answer

Product Cost per unit Replacement cost Net realizable value* Net realizable value less normal profit Designated market value Lower of cost or market 1 2 3 4 5 6 (Mid value of 2,3 & 4) (Lower of 1 & 5) A 24 22 33.5 25.5 25.5 24 [33.5-(40*20%)] B 42 40 38 26 38 38 [38-(48*25%)] C 120 115 165 108 115 115 [165-(190*30%)] D 19 15.8 22 19.4 19.4 19 [22-(26*10%)] Total value of inventory 196 Net realizable value=Expected selling price-Estimated disposal cost

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