Compute the total inventory value if the lower of cost or market is applied to (a) each individual…


Question Description:

25

Lower of Cost or Market РThe Palmquist Company has five different inventory items that it values by the lower of cost or market method. The normal markup on all items is 20% of cost. The following information is obtained from the company’s records: Item Units Cost Replacement Cost Net Realizable Value 1 500 $10.00 $9.10 $9.20 2 400 8 8.1 7.8 3 300 15 13.5 14 4 200 18 12 17 5 100 25 25.5 25.3 Required 1. Compute the lower of cost or market value for each item. 2. Compute the total inventory value if the lower of cost or market is applied to (a) each individual item and (b) the inventory as a whole. Explain the reason for the difference between the two values.

Answer

25