Question

As of year-end, June Company had three different inventory items in its ending inventory. June had 10 units of each item on hand. The unit cost, replacement cost, expected selling price, estimated disposal and completion costs, and normal gross profit as a percentage of expected selling price follow: Item A: $10, $9, $20, $2, 50% Item B: $30, $32, $50, $4, 30% Item C: $50, $48, $90, $0, 40% June uses a LIFO costing method. By what amount will June write-down its inventory?

Answer 1

Answer:

$10

Explanation:

unit cost, replacement cost, expected selling price, estimated disposal and completion costs, and normal gross profit as a percentage of expected selling price follow

Item A: $10, $9, $20, $2, 50%

Item B: $30, $32, $50, $4, 30%

Item C: $50, $48, $90, $0, 40%

I used an excel spreadsheet to calculate the value of ending inventory using the lower of cost or market value. The ending inventory = $890, while the purchase cost = $100 + $300 + $500 = $900

the inventory should be written down by $10

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