1 answer

Check my work Exercise 9-6 (Algo) Lower of cost or market (LO9-1) Tatum Company has four...

Question:

Check my work Exercise 9-6 (Algo) Lower of cost or market (LO9-1) Tatum Company has four products in its inventory. Informati

Check my work Exercise 9-6 (Algo) Lower of cost or market (LO9-1) Tatum Company has four products in its inventory. Information about the December 31, 2021, inventory is as follows: points 02:09:41 Product Total Cost 101 $146,000 102 108,600 103 72,300 104 36, 700 Total Replacement Cost $ 133,400 102,500 48,200 34,300 Total Net Realizable Value $121,200 132,700 60,800 61,500 eBook The normal profit is 35% of total cost. Print Reference Required: 1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products. 2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry. Complete this question by entering your answers in the tabs below. Required Required Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products. NRY - NP Market Inventory Value Product Total Cost Replacement cost NRV 101 102 103 104 Totals $ 0 Required 1 $ 0 Required 2 >

Answers

Solution 1:

Computation of carrying value of inventory at December 31, 2021
Product Total Cost Replacement cost (a) NRV (b) NRV-NP [NRV- Cost*35%] (c ) Market (Middle Value of a,b,c) Inventory value (Lower of Cost or Market)
101 146000 133400 121200 70100 121200 121200
102 108600 102500 132700 94690 102500 102500
103 72300 48200 60800 35495 48200 48200
104 36700 34300 61500 48655 48655 36700
Totals 363600 308600

Solution 2:

Transaction General Journal Debit Credit
1 Cost of goods sold (363600- 308600) 55000
      Inventory 55000
.

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