Calculate the lower-of-cost-or-market

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Question - Swifty Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company's inventory records as of December 31, 2017.

Item

Quantity

Unit Cost

Replacement Cost/Unit

Estimated Selling Price/Unit

Completion & Disposal Cost/Unit

Normal Profit Margin/Unit

A

1,400

$8.48

$9.49

$11.87

$1.70

$2.03

B

1,100

9.27

8.93

10.62

1.02

1.36

C

1,300

6.33

6.10

8.14

1.30

0.68

D

1,300

4.29

4.75

7.12

0.90

1.70

E

1,700

7.23

7.12

7.57

0.79

1.13

Greg Forda is an accounting clerk in the accounting department of Swifty Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.

Calculate the lower-of-cost-or-market using the individual-item approach.

Show the journal entry he will need to make in order to write down the ending inventory from cost to market.

Reference no: EM131712146

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