Question

The inventory of Royal Decking consisted of five products.
Information about the December 31, 2018, inventory is as
follows:

Per Unit | ||||||||||||

Product | Cost | Replacement Cost | Selling Price | |||||||||

A | $ | 56 | $ | 51 | $ | 76 | ||||||

B | 96 | 86 | 116 | |||||||||

C | 56 | 71 | 96 | |||||||||

D | 116 | 86 | 146 | |||||||||

E | 36 | 44 | 46 | |||||||||

Selling costs consist of a sales commission equal to 10% of selling
price and shipping costs equal to 5% of cost. The normal gross
profit percentage is 35% of selling price.

**Required:**

What unit value should Royal Decking use for each of its products
when applying the lower of cost or market (LCM) rule to units of
ending inventory? **(Do not round intermediate calculations.
Round final answers to 2 decimal places.)**

Answer #1

Valuation of Units :-

Product | Cost | Replacement cost | NRV | NRV-NP | Market | Per Unit Inventory Value |

A | $56 | $51 | $65.6 | $39 | $51 | $51 |

B | $96 | $86 | $99.6 | $59 | $86 | $86 |

C | $56 | $71 | $83.6 | $50 | $71 | $56 |

D | $116 | $86 | $125.6 | $74.5 | $86 | $86 |

E | $36 | $44 | $39.6 | $23.5 | $39.6 | $36 |

Notes :-

=> Market Value = middle number among the replacement cost, NRV and NRV-NP.

=> Per Unit Inventory Value = Lower of Cost and Market Value.

Calculation of Net Realisable Value(NRV) - Net Profit(NP)

Product | Selling Price (a) | Sales Comm. (b)=(a*10%) | Cost Price (c) | Shipping Cost (d)=(c*5%) | NRV (e)=(a-b-d) | NP (f)=(a*35%) | NRV-NP (e-f) |

A | $76 | $7.6 | $56 | $2.8 | $65.6 | $26.6 | $39 |

B | $116 | $11.6 | $96 | $4.8 | $99.6 | $40.6 | $59 |

C | $96 | $9.6 | $56 | $2.8 | $83.6 | $33.6 | $50 |

D | $146 | $14.6 | $116 | $5.8 | $125.6 | $51.1 | $74.5 |

E | $46 | $4.6 | $36 | $1.8 | $39.6 | $16.1 | $23.5 |

The inventory of Royal Decking consisted of five products.
Information about the December 31, 2018, inventory is as
follows:
Per Unit
Product
Cost
Selling Price
A
$
140
$
160
B
180
200
C
140
180
D
100
150
E
60
80
Costs to sell consist of a sales commission equal to 10% of selling
price and shipping costs equal to 5% of cost.
Required:
What unit value should Royal Decking use for each of its products
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Product
Quantity
Unit
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Unit
Replacement
Cost
Unit
Selling
Price
A
700
$
21
$
23
$
27
B
1,000
26
22
29
C
900
14
13
19
D
600
18
15
17
E
500
25
23
24
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Product
Quantity
Unit Cost
Unit Replacement Cost
Unit Selling Price
A
1,000
$10
$12
$16
B
800
$15
$11
$18
C
600
$3
$2
$8
D
200
$7
$4
$6
E
600
$14
$12
$13
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Herman Company has three products in its ending inventory.
Specific per unit data for each of the products are as follows:
Product 1
Product 2
Product 3
Cost
$
33
$
103
$
63
Selling price
79
159
109
Disposal costs
6
66
23
Product
Cost
NRV
Per Unit Inventory Value
1
2
3
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Information about the December...

The December 31, 2020 inventory of Sandhill Company consisted of
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Product
Original Cost
Replacement
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Estimated
Disposal Cost
Expected
Selling Price
Normal Profit
on Sales
A
$30.00
$28.00
$5.00
$50.00
30.00%
B
$45.00
$43.00
$9.00
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25.00%
C
$148.00
$143.00
$28.00
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D
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Using the lower-of-cost-or-market approach applied on an
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Ross Electronics has one product in its ending inventory. Per
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What unit value should Ross use when applying the lower of cost or
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The December 31, 2019 inventory of Jenner Corp. consisted of
three products, for which certain information is provided below. (8
points)
Product
Original Cost
Replacement cost
Estimated disposal cost
Expected selling price
Normal Profit on sales
A
$24
$22
$6.5
$40
20%
B
$42
$40
$10
$48
25%
C
$120
$115
$25
$190
30%
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Using the lower-of-cost-or-market approach applied on an
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Tatum Company has four products in its inventory. Information
about the December 31, 2018, inventory is as follows:
Product
Total Cost
Total
Replacement Cost
Total Net
Realizable Value
101
$
146,000
$
133,400
$
121,200
102
108,600
102,500
132,700
103
72,300
48,200
60,800
104
36,700
34,300
61,500
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Required:
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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%
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Product
COST
NETREALIZABLE VALUE
>
LCNRV
A
B
C
D

Valuing Inventory at
Lower-of-Cost-or-Market
Gard Inc. has compiled the following information related to its
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Note: Round each amount to the nearest
dollar.
#1
#2
#3
#4
#5
Estimated selling price
$66
$76
$82
$100
$130
Original cost (LIFO)
45
48
60...

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