3. (8 points) Smashing Pumpkins Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2014, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Item D Item E Item F Item G Item H Item I Estimated selling price $130 $100 $90 $85 $105 $80 Cost 70 80 60 80 45 32 Replacement cost 110 65 70 30 70 30 Estimated selling expense 25 25 20 20 25 25 Normal profit 20 20 20 20 20 20 Instructions Using the lower-of-cost-or-market rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2014, for each of the inventory items above.Answers
| Product | Cost | Replacement cost | NRV | NRV - NP | Market | Per unit Inventory value | |
| Item D | $70.00 | $110.00 | $105.00 | $85.00 | $110.00 | $70.00 | |
| Item E | $80.00 | $65.00 | $75.00 | $55.00 | $65.00 | $65.00 | |
| Item F | $60.00 | $70.00 | $70.00 | $50.00 | $70.00 | $60.00 | |
| Item G | $80.00 | $30.00 | $65.00 | $45.00 | $45.00 | $45.00 | |
| Item H | $45.00 | $70.00 | $80.00 | $60.00 | $70.00 | $45.00 | |
| Item I | $32.00 | $30.00 | $55.00 | $35.00 | $35.00 | $32.00 | |
| NRV =[Selling price - Selling expenses] | |||||||
| Market =Higher of (Replacement cost, NRV-NP) | |||||||
| Per unit Inventory value =Lower of(Cost, Market) | |||||||
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