PR 7-4B Lower-of-cost-or-market inventory

Data on the physical inventory of Chiron Co. 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 40 $ 59
Beta 25 170 15 180
Charlie 20 130 15 128
Echo 150 25 100 27
Frank 6 550 15 540
George 90 16 100 15
Killo 8 395 4 394
Quebec 500 6 500 7
Romeo 75 25 80 26
Sierra 5 250 4 260
Whiskey 100 17 115 16
X-Ray 10 750 8 740

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:

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   170  180   3,400   3,600   3,400 9 Charlie  30 20  130  125   2,600   2,500  10   10  128  125   1,280   1,250  11        3,880   3,750   3,750 12 Echo  125   25  26   3,125   3,250   3,125 13 Frank  18 6  550  550   3,300   3,300  14   12  540       550   6,480   6,600  15        9,780   9,900   9,780 16 George  75   16  17   1,200   1,275   1,200 17 Killo  5   395  390   1,975   1,950   1,950 18 Quebec  375   6  6   2,250   2,250   2,250 19 Romeo  90 75  25  18   1,875   1,350  20   15  26         18   390   270  21        2,265   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  17  20   1,700   2,000  26   40  16         20   640   800  27        2,340   2,800   2,340 28 X-Ray  15 10  750  745   7,500   7,450  29   5  740       745   3,700   3,725  30        11,200   11,175   11,175 31 Total      $45,197  $45,146  $44,166