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Forest Company has five products in its inventory. Information about ending inventory follows. Product Quantity Unit Cost Unit Replacement Cost Unit Selling Price A 600 $ 12 $ 14 $ 18 B 1,000 17 13 20 C 600 5 4 10 D 600 9 6 8 E 600 16 14 15 The cost to sell for each product consists of a 10 percent sales commission. The normal profit for each product is 25 percent of the selling price. Required: Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products. Determine the carrying value of inventory, assuming the LCM rule is applied to the entire inventory. Assuming inventory write-downs are common for Forest, record any necessary year-end adjusting entry based on the amount calculated in requirement 2. Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products.

Forest Company has five products in its inventory. Information about ending inventory follows. Product Quantity Unit Cost Unit Replacement Cost Unit Selling Price A 600 $ 12 $ 14 $ 18 B 1,000 17 13 20 C 600 5 4 10 D 600 9 6 8 E 600 16 14 15 The cost to sell for each product consists of a 10 percent sales commission. The normal profit for each product is 25 percent of the selling price. Required: Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products. Determine the carrying value of inventory, assuming the LCM rule is applied to the entire inventory. Assuming inventory write-downs are common for Forest, record any necessary year-end adjusting entry based on the amount calculated in requirement 2. Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter8: Inventories: Special Valuation Issues
Section: Chapter Questions
Problem 2RE: Black Corporation uses the LIFO cost flow assumption. Each unit of its inventory has a net...
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Forest Company has five products in its inventory. Information about ending inventory follows.

Product Quantity Unit Cost Unit Replacement Cost Unit Selling Price
A 600 $ 12 $ 14 $ 18
B 1,000 17 13 20
C 600 5 4 10
D 600 9 6 8
E 600 16 14 15

The cost to sell for each product consists of a 10 percent sales commission. The normal profit for each product is 25 percent of the selling price.

Required:

  1. Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products.
  2. Determine the carrying value of inventory, assuming the LCM rule is applied to the entire inventory.
  3. Assuming inventory write-downs are common for Forest, record any necessary year-end adjusting entry based on the amount calculated in requirement 2. Determine the carrying value of ending inventory, assuming the lower of cost or market (LCM) rule is applied to individual products.
  4.  

 

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