Question

The following information pertains to Hagen Metal Work’s ending inventory for the current year:

		Unit	Unit
Item	Quantity	Cost	Market Value
C	260	$ 13	$ 10
D	250	15	14
K	70	11	14
M	62	8	14

Required

a.

Determine the value of the ending inventory using the lower-of-cost-or-market rule applied to (1) each individual inventory item and (2) the inventory in aggregate.

	Ending Inventory
Individual item method
Aggregate method

b.

Prepare any necessary journal entries, assuming the decline in value is immaterial, using the (1) individual method and (2) aggregate method. Hagen Metal Works uses the perpetual inventory system. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Event 1: record entry for cost of goods sold using individual item methods

Event 2: record the entry for cost of goods sold using aggregate method.

Answer 1

a

Item	Quantity	Unit Cost	Unit Market Value	Total Cost	Total Market	Lower Cost/Mkt.
C	260	13	10	3380	2600	2600
D	250	15	14	3750	3500	3500
K	70	11	14	770	980	770
M	62	8	14	496	868	496
				8396	7948	7366

Ending inventory using the individual item method			7366
Ending inventory using the aggregate method			7948

Prepare any necessary journal entries, assuming the decline in value is immaterial, using the (1) individual method and (2) aggregate method

		Debit	Credit
(1)	Cost of goods sold	1030
	inventory		1030
(2)	Cost of goods sold	448
	inventory		448

Cost of goods sold	8396-7366	1030
Cost of goods sold	8396-7948	448