Question

Pair Co. sells one product and uses the last-in, first-out (LIFO) method to determine inventory cost. Information for the month of January follows: Units Unit Cost Beginning inventory, 1/1 3,000 $ 4.70 Purchases, 1/4 8,000 $ 3.90 Sales 7,500 Pair has determined that at January 31 the replacement cost of its inventory was $4 per unit and the net realizable value was $4.90 per unit. Pair’s normal profit margin is $1 per unit. Pair applies the lower of cost of or market rule to total inventory and records any resulting loss. At January 31, what should be the net carrying amount of Pair’s inventory?

Answer 1

Answer:

Ending Inventory 14,000

Explanation:

PURCHASES  

DATE QUANTY PRICE SUBTOTAL

Beginning 3000  $3.90  $14,100.00

Purchase       8000   $4.70     $31,200.00

Total available 11,000

Sales 7,500

Ending Inventory 3,500

Book value (FIFO) 3,500 x 4.7 = 16,450

Cost $4

net realizable $4.90

Lower Cost =$4

Ending Inventory  4$ x 3,500 = $14,000

Loss 2,450