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Lower of Cost or Market Inventory

Bob's Jewelry Company's inventory records indicates the following:
							Normal
	Quantity	Unit Cost		Replacement Cost			Profit
Item	On Hand	When Acquired		at Year-End		Selling Price	Margin

Watches	100	$258		$269		$230	50
Rings	250	903		1,025		950	100
Bracelets	60	1,588		1,680		1,783	80

Compute the total ending inventory value using the Lower of Cost or Market rule
applied to each item.



Answer
	Bob's Jewelry Company

Item	Quantity on hand (a)	Cost per unit,$	Replacement cost per item, $	Lower of Cost / Replacement cost per unit, $ (b)	Total value (a*b), $
Item	Quantity on hand (a)	Cost per unit,$	Replacement cost per item, $	Lower of Cost / Replacement cost per unit, $ (b)	Total value (a*b), $

Watches	100	258.00	269.00	258.00	25,800
Rings	250	903.00	1,025.00	903.00	225,750
Bracelets	60	1,588.00	1,680.00	1,588.00	95,280
					346,830

Here market value is the replacement cost of inventories at year end. Accountants define replacement cost as market value.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9504265

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