Forest Company has five products in its inventory. Information about ending inventory follows. Unit Replacement Unit Selling Price Cost $ 16 18 8 6 13 Product Quantity Unit Cost A 1,000 $ 10 B C с D E 800 600 200 600 15 3 7 14 $ 12 11 2 4 12 The cost to sell for each product consists of a 15 percent sales commission. The normal profit for each product is 40 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.
Forest Company has five products in its inventory. Information about ending inventory follows. Unit Replacement Unit Selling Price Cost $ 16 18 8 6 13 Product Quantity Unit Cost A 1,000 $ 10 B C с D E 800 600 200 600 15 3 7 14 $ 12 11 2 4 12 The cost to sell for each product consists of a 15 percent sales commission. The normal profit for each product is 40 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.
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 2MC: Moore Company uses the LIFO cost flow assumption and carries Product A in inventory on December 31,...
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![Forest Company has five products in its inventory. Information about ending inventory follows.
Product Quantity Unit Cost
A
1,000
B
800
с
600
D
200
E
600
$ 10
15
3
7
14
Unit Replacement Unit Selling
Cost
Price
$ 16
18
8
6
13
$ 12
11
2
4
12
The cost to sell for each product consists of a 15 percent sales commission. The normal profit for each product is 40 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdcf55314-e77c-4207-b6b5-41857ff6b275%2Fca50f3f1-35f3-45e3-a18f-be3b063c9b34%2F883ft8i_processed.png&w=3840&q=75)
Transcribed Image Text:Forest Company has five products in its inventory. Information about ending inventory follows.
Product Quantity Unit Cost
A
1,000
B
800
с
600
D
200
E
600
$ 10
15
3
7
14
Unit Replacement Unit Selling
Cost
Price
$ 16
18
8
6
13
$ 12
11
2
4
12
The cost to sell for each product consists of a 15 percent sales commission. The normal profit for each product is 40 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.
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Step 1: Inventory valuation:
VIEWStep 2: (1) Determine the carrying value of inventory under the lower of cost or market (LCM) rule :
VIEWStep 3: (2) Determine the carrying value of inventory at December 31, 2021 on entire inventory:
VIEWStep 4: (3) Record the necessary year-end adjusting entry:
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