Brooks Company carries three inventory items. The following information pertains to the ending inventory:

Brooks Company carries three inventory items. The following information pertains to the ending inventory:
     

Item	Quantity	Unit Cost			Unit Market Value
A	195	$	11		$	10
F	230		16			15
K	170		5			8

 

Required

a.	Determine the ending inventory that Brooks will report on the balance sheet, assuming that it  applies the lower-of-cost-or-market rule to individual inventory items.

Explanation:

a.

a.	b.	c.			d.			e.			f.			g.
Item	Quantity	Cost Per Unit			Mkt. Value Per Unit			Unit Lower Cost/Mkt.			Total Cost			Total Lower Cost/Mkt.
											(b × c)			(b × e)
A	195	$	11		$	10		$	10		$	2,145		$	1,950
F	230		16			15			15			3,680			3,450
K	170		5			8			5			850			850
Totals											$	6,675		$	6,250

 

The inventory would be carried at $6,250, the lower of cost or market applied to individual inventory items.

b.
Cost of goods sold (Inventory loss): $6,675 – $6,250 = $425
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