Question

Please show how you get to the answer and explain it!

Given the following information for Gator Company who uses the LIFO method:

​

​	​	​	Net	​	NRV Minus
​	​	​	Realizable	Replacement	Normal
Item	Quantity	Cost	Value	Cost	Profit
1	1	$17.70	$24.60	$18.00	$17.10
2	1	10.80	8.28	9.30	5.58
3	1	72.00	64.80	67.20	57.60
4	1	4.80	3.12	2.88	2.64
5	1	12.00	12.30	12.60	11.10
6	1	48.00	45.60	38.40	40.80

​

​

Required:

a.	Determine the lower of cost or market value for each inventory item for Gator Company.
b.	Determine the lower of cost or market value for Gator Company's inventory if the lower of cost or market rule is applied to the total inventory.

Answer 1

a.
Item	Net realizable value (a)	Replacement cost (b)	NRV minus Normal profit (c)	Market value ( Middle of a,b,c )	Cost	Lower of cost or market	Quantity	Inventory value
1	24.60	18.00	17.10	18.00	17.70	17.70	1	17.70
2	8.28	9.30	5.58	8.28	10.80	8.28	1	8.28
3	64.80	67.20	57.60	64.80	72.00	64.80	1	64.80
4	3.12	2.88	2.64	2.88	4.80	2.88	1	2.88
5	12.30	12.60	11.10	12.30	12.00	12.00	1	12.00
6	45.60	38.40	40.80	40.80	48.00	40.80	1	40.80

b.
Item	Market value	Quantity	Total market value	Cost	Quantity	Total cost
1	18	1	18	17.70	1	17.7
2	8.28	1	8.28	10.80	1	10.8
3	64.8	1	64.8	72.00	1	72
4	2.88	1	2.88	4.80	1	4.8
5	12.3	1	12.3	12.00	1	12
6	40.8	1	40.8	48.00	1	48
Total			147.06			165.30

Inventory value =

147.06