Please answer the following Sandals Company is preparing the

Please answer the following

Sandals Company is preparing the annual financial statements dated December 31 Ending inventory information about the four major items stocked for regular sale follows Unit Cost Quantity When Acquire Market Value on Hand (FIFO)at Year-End Product Line Air Flow Blister Buster Coolonite Dudesly 25 80 34 15 S 15 36 S 13 38 60 28 Required 1. Compute the amount that should be reported for the ending inventory using the LCM rule applied to each item 2. How will the write-down of inventory to lower of cost or market affect the company\'s expenses reported for the year ended December 31? st of goods sold vill be

Solution

Answers

Unit Cost

Market Value

Lower of Cost or MV

Units

Ending Inventory Valued at

[A]

[B]

[C = lower of ‘A’ or ‘B’]

[D]

[E = C x D]

Air Flow

$                13.00

$                        15.00

$                         13.00

25

$                   325.00

Blister Buster

$                38.00

$                        36.00

$                         36.00

80

$               2,880.00

Coolonite

$                60.00

$                        55.00

$                         55.00

34

$               1,870.00

Dudesly

$                28.00

$                        33.00

$                         28.00

15

$                   420.00

TOTAL

154

$               5,495.00

Answer: Ending Inventory = $ 5,495.00 as per LCM Rule

FIFO Cost

Units

Inventory at cost

Air Flow

$                13.00

25

$                      325.00

Blister Buster

$                38.00

80

$                   3,040.00

Coolonite

$                60.00

34

$                   2,040.00

Dudesly

$                28.00

15

$                      420.00

TOTAL cost of ending inventory as per FIFO

154

$                   5,825.00

Total cost of ending inventory as per LCM rule

154

$                   5,495.00

Decrease in Inventory Value

$                      330.00

Answer: Inventory cost is getting decreased by $ 330

Hence, The Cost of Goods Sold will be INCREASED by $ 330

	Unit Cost	Market Value	Lower of Cost or MV	Units	Ending Inventory Valued at
	[A]	[B]	[C = lower of ‘A’ or ‘B’]	[D]	[E = C x D]
Air Flow	$                13.00	$                        15.00	$                         13.00	25	$                   325.00
Blister Buster	$                38.00	$                        36.00	$                         36.00	80	$               2,880.00
Coolonite	$                60.00	$                        55.00	$                         55.00	34	$               1,870.00
Dudesly	$                28.00	$                        33.00	$                         28.00	15	$                   420.00
	TOTAL	154	$               5,495.00