Question

At the end of the year, Randy’s Parts Co. had the following items in inventory:

Item	Quantity			Unit Cost				Unit Market Value
P1		60			$	85			$	90
P2		40				70				72
P3		80				130				120
P4		70				125				130

Required
a. Determine the amount of ending inventory using the lower-of-cost-or-market rule applied to each individual inventory item.
  

b. Provide the adjustment necessary to write down the inventory based on Requirement a. Assume that Randy’s Parts Co. uses the perpetual inventory system.
  

c. Determine the amount of ending inventory, assuming that the lower-of-cost-or-market rule is applied to the total inventory in aggregate.
  

d. Provide the adjustment necessary to write down the inventory based on Requirement c. Assume that Randy’s Parts Co. uses the perpetual inventory system.

Answer 1

Solution:-