PR 7-4A Lower-of-cost-or-market inventory
Data on the physical inventory of Rhino Company as of December 31, 2012, are presented
in the working papers. The quantity of each commodity on hand has been determined
and recorded on the inventory sheet. Unit market prices have also been determined as
of December 31 and recorded on the sheet. The inventory is to be determined at cost
and also at the lower of cost or market, using the first-in, first-out method. Quantity and
cost data from the last purchases invoice of the year and the next-to-the-last purchases
invoice are summarized as follows:
Last
Purchases Invoice
Next-to-the-Last
Purchases Invoice
Description
Quantity
Purchased
Unit
Cost
Quantity
Purchased
Unit
Cost
Alpha 30 $ 60 30 $ 59
Beta 35 175 20 180
Charlie 20 130 25 129
Echo 130 24 100 25
Frank 10 565 10 560
George 100 15 100 14
Killo 10 385 5 384
Quebec 500 8 500 7
Romeo 80 22 50 21
Sierra 5 250 4 260
Whiskey 100 21 100 19
X-Ray 10 750 9 745
Instructions
Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows:
1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase.
2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase.
3. Total the cost and market columns and insert the lower of the two totals in the Lower of C or M column. The first item on the inventory sheet has been completed as an example.
Answer:
A B C D E F G
1
Inventory Sheet December 31, 2012 2 Unit Unit Total 3 Inventory Cost Market Lower 4 Description Quantity Price Price Cost Market of C or M 5 Alpha 38 30 $ 60 $ 57 $ 1,800 $ 1,710 6 8 59 $ 57 472 456 7 2,272 2,166 $ 2,166 8 Beta 20 175 180 3,500 3,600 3,500 9 Charlie 30 20 130 125 2,600 2,500 10 10 129 125 1,290 1,250 11 3,890 3,750 3,750 12 Echo 125 24 26 3,000 3,250 3,000 13 Frank 18 10 565 550 5,650 5,500 14 8 560 550 4,480 4,400 15 10,130 9,900 9,900 16 George 75 15 17 1,125 1,275 1,125 17 Killo 5 385 390 1,925 1,950 1,925 18 Quebec 375 8 6 3,000 2,250 2,250 19 Romeo 90 80 22 18 1,760 1,440 20 10 21 18 210 180 21 1,970 1,620 1,620 22 Sierra 6 5 250 235 1,250 1,175 23 1 260 235 260 235 24 1,510 1,410 1,410 25 Whiskey 140 100 21 20 2,100 2,000 26 40 19 20 760 800 27 2,860 2,800 2,800 28 X-Ray 15 10 750 745 7,500 7,450 29 5 745 745 3,725 3,725 30 11,225 11,175 11,175 31 Total $46,407 $45,146 $44,621
in the working papers. The quantity of each commodity on hand has been determined
and recorded on the inventory sheet. Unit market prices have also been determined as
of December 31 and recorded on the sheet. The inventory is to be determined at cost
and also at the lower of cost or market, using the first-in, first-out method. Quantity and
cost data from the last purchases invoice of the year and the next-to-the-last purchases
invoice are summarized as follows:
Purchases Invoice
Next-to-the-Last
Purchases Invoice
Description
Quantity
Purchased
Unit
Cost
Quantity
Purchased
Unit
Cost
Alpha 30 $ 60 30 $ 59
Beta 35 175 20 180
Charlie 20 130 25 129
Echo 130 24 100 25
Frank 10 565 10 560
George 100 15 100 14
Killo 10 385 5 384
Quebec 500 8 500 7
Romeo 80 22 50 21
Sierra 5 250 4 260
Whiskey 100 21 100 19
X-Ray 10 750 9 745
Instructions
Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows:
1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase.
2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase.
3. Total the cost and market columns and insert the lower of the two totals in the Lower of C or M column. The first item on the inventory sheet has been completed as an example.
Answer:
A B C D E F G
1
Inventory Sheet December 31, 2012 2 Unit Unit Total 3 Inventory Cost Market Lower 4 Description Quantity Price Price Cost Market of C or M 5 Alpha 38 30 $ 60 $ 57 $ 1,800 $ 1,710 6 8 59 $ 57 472 456 7 2,272 2,166 $ 2,166 8 Beta 20 175 180 3,500 3,600 3,500 9 Charlie 30 20 130 125 2,600 2,500 10 10 129 125 1,290 1,250 11 3,890 3,750 3,750 12 Echo 125 24 26 3,000 3,250 3,000 13 Frank 18 10 565 550 5,650 5,500 14 8 560 550 4,480 4,400 15 10,130 9,900 9,900 16 George 75 15 17 1,125 1,275 1,125 17 Killo 5 385 390 1,925 1,950 1,925 18 Quebec 375 8 6 3,000 2,250 2,250 19 Romeo 90 80 22 18 1,760 1,440 20 10 21 18 210 180 21 1,970 1,620 1,620 22 Sierra 6 5 250 235 1,250 1,175 23 1 260 235 260 235 24 1,510 1,410 1,410 25 Whiskey 140 100 21 20 2,100 2,000 26 40 19 20 760 800 27 2,860 2,800 2,800 28 X-Ray 15 10 750 745 7,500 7,450 29 5 745 745 3,725 3,725 30 11,225 11,175 11,175 31 Total $46,407 $45,146 $44,621
