Acc 422 E9-1 & E9-12

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Acc 422 E9-1 & E9-12

By | July 2012
Page 1 of 2
E9-1 (Lower-of-Cost-or-Market) The inventory of Oheto Company on December 31, 2011, consists of the following items.

CostCost to TotalTotal Lower Cost
Part No. Qty Unit Replace CostReplace or Replace 110 600 $95$ 100 $ 57,000$ 60,000 $57,000 111 1,000 60 52 60,000 52,00052,000 112 500 80 76 40,000 38,000 38,000 113 200 170 180 34,000 36,000 34,000 120 400 205 208 82,000 83,20082,000 121* 1,600 16 0.50 25,600 800 800 122 300 240 235 72,000 70,50070,500

Totals $370,600 $340,500 $ 334,300

*Part No. 121 is obsolete and has a realizable value of $0.50 each as scrap.

Instructions
(a)Determine the inventory as of December 31, 2011, by the lower-of-cost-or-market method, applying this method directly to each item.$334,300

(b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory. $340,500

E9-12 (Gross Profit Method) Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. (a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales. Inventory, May 1 $ 160,000

Purchases (gross) 640,000
Purchase discounts (12,000)
Freight-in 30,000
Goods Available (at cost)$ 818,000
Sales $1,000,000
Sales returns (70,000)
Net Sales (at selling price) $ 930,000 Less: Gross Profit (25% of $930,000) (232,500)
Sales (at cost) 697,500
Approx Inventory, May 31 (at cost)...