1 7. A company sells four products: I, II, III, and IV. The company values all inventories using the lower-of-cost-or-market procedure. The company has consistently experienced a profit margin of 20 percentof sales and expects this rate to hold for the future. Additional information, shown below, is availablefor the most recent year as of December 31ProductIIIIIIVA. $90B. $80$70$60OriginalCost$607080908Cost toReplace$70906080Estimated Costto Sell$10201020Using the lower-of-cost-or-market procedure, what is the reported inventory value at December 31for one unit of Product I?100-10 - 90100-60=40Expected SellingPrices$1001206090770

Inventory is valued at cost or market value, which ever is lower.Marrket value is the replacement…

Answered: expects this recent year as of Decem…

Business

Accounting

expects this recent year as of Decem Original Cost $60 70 80

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 11RE: Johnson Corporation had beginning inventory of 20,000 at cost and 35,000 at retail. During the year,...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

7. A company sells four products: I, II, III, and IV. The company values all inventories using the lower-
of-cost-or-market procedure. The company has consistently experienced a profit margin of 20 percent
of sales and expects this rate to hold for the future. Additional information, shown below, is available
for the most recent year as of December 31
Product
II
III
IV
A. $90
B. $80
$70
$60
Original
Cost
$60
70
80
90
8
Cost to
Replace
$70
90
60
80
Estimated Cost
to Sell
$10
20
10
20
Using the lower-of-cost-or-market procedure, what is the reported inventory value at December 31
for one unit of Product I?
100-10 - 90
100-60=40
Expected Selling
Prices
$100
120
60
90
770

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