Purchase Solution

Determining the Lower of Inventory Cost or Market Value

Not what you're looking for?

Ask Custom Question

 The December 31, 2016 inventory of ABC Company consisted of four products, for which certain information is provided below.
                                                       Replacement                 Estimated                  Expected              Normal Profit
Product               Original Cost                  Cost                          Disposal Cost             Selling Price            on Sales     
    A                           $24.00           $22.00                             $6.50                           $40.00                       20%
    B                           $42.00           $40.00                           $10.00                           $48.00                       25%
    C                         $120.00         $115.00                           $25.00                         $190.00                       30%
    D                           $19.00          $15.80                             $4.00                           $26.00                       10%

Using the lower-of-cost-or-market approach applied on an individual-item basis, compute the inventory valuation that should be reported for each product on December 31, 2016.

Purchase this Solution
Solution Summary

This solution illustrates how to compute the lower of an inventory item's cost or market value using accounting measures.

Purchase this Solution
Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • Lower of Cost or Market Valuation

    AG incorporates the Lower of Cost or Market in determining ending inventory. Assume that the market value of the inventory suggested a value of $8,000. The responses are attached.

  • Calculation of Lower of Cost or Market nventory Valuation

    Calculations and reasoning for determining inventory valuation for the lower of cost or market method are provided.

  • ASC SYSTEM: Accounting for Obsolete Inventory

    exclude an item from being classified as inventory, defines "market" as used in the phrase "lower-of-cost-or-market", and explains when it is acceptable to state inventory above cost and which industries allow this practice.

  • Determining the Value of Inventory under IFRS and US GAAP

    cost is below the floor, we would take the floor as the value of ending inventory The value is $17.50 Under IFRS, the method is lower of cost or NRV.

  • Lowering of Cost or Market Method

    At the total inventory level, lower of cost or market, the market value would be taken since it is lower than the cost. The inventory value is $340,020. Please view attachment to see calculations.

  • Lower-of-Cost-or-Market Rule (Method)

    344979 Lower-of-Cost-or-Market Rule (Method) Explain the reasoning behind the lower of cost or market rule being used to value inventory in everyday language.

  • Lower of cost or market

    The solution explains some questions relating to inventory valuation using lower of cost or market rule.

  • value inventories using the lower of cost or market

    Note that this method is an application of conservatism. LCM states the user must value the inventory at lower of cost or market. "Cost" refers to the original cost of the inventory. "Market" is defined as the replacement cost.

  • Journal Entries - Inventory Valuation

    196783 Entries for lower-of-cost-or-cost-of-market-direct-and-allowance Mary Stuart Company determined its ending inventory at cost and at lower of cost or market at December 31, 2007 and December 31, 2008 as shown below: Cost Lower-of-cost-or-market

View More Related Solutions