Question

Question 1 part A and B

A. Montana Co. has determined its year-end inventory on a FIFO basis to be $641,000. Information pertaining to that inventory is as follows:

Selling price	$	620,000
Costs to sell		40,000
Replacement cost		551,000

What should be the reported value of Montana’s inventory?

Multiple Choice

• $620,000.

• $551,000.

• $580,000.

• $605,000.

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

	Surgical Equipment				Surgical Supplies				Rehab Equipment				Rehab Supplies
Selling price	$	271			$	132			$	338			$	157
Cost		163				101				281				157
Costs to sell		19				10				21				7

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

Multiple Choice

• $281.

• $317.

• $270.

• $239.

Answer 1

A.
MV (higher of NRV and replacement cost)
NRV (620000-40000)		580000
Replacement cost		551000
MV			580000
Invenotry value (lower of cost or MV)
Cost			641000
MV			580000
Inventory value		580000
Answer is $ 580,000
B.
Rehab equipment:
Cost			281
Or
NRV (338-21)		317
whichever is lower
Inventory value		281
Answer is $ 281.