Question

1) Data related to the inventories of Mountain Ski Equipment and Supplies is presented below:

	Skis				Boots				Apparel				Supplies
Selling price	$	196,000			$	166,000			$	136,000			$	76,000
Cost		136,000				141,000				98,000				56,000
Replacement cost		136,000				131,600				126,000				66,000
Sales commission		15	%			15	%			15	%			15	%
Normal gross profit ratio		25	%			25	%			20	%			20	%

In applying the lower of cost or market rule, the inventory of boots would be valued at:

2)

Data related to the inventories of Costco Medical Supply are presented below:

	Surgical Equipment				Surgical Supplies				Rehab Equipment				Rehab Supplies
Selling price	$	269			$	125			$	342			$	154
Cost		161				104				261				148
Costs to sell		23				6				27				13

In applying the lower of cost or net realizable value rule, the inventory of surgical equipment would be valued at:

3)

Madison Co. has determined its year-end inventory on a LIFO basis to be $619,000. Information pertaining to that inventory is as follows:

Selling price	$	739,000
Costs to sell		39,400
Normal profit margin		89,500
Replacement cost		639,000

What should be the reported value of Madison's inventory?

Answer 1

boots	amount ($)
selling price	166000
sales commission (15% of selling price)	24900
net realizable(selling price – sales commission)	141100
cost	141000
inventory will be valued at cost or net realizable which ever is low	141000
surgical equipment	amount ($)
net realizable value	selling price – cost to sell
selling price	269
cost to sell	-23
net realizable value	246
cost	161
inventory will be valued at cost or net realizable which ever is low	161