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Chapter 9: Q. 9-7E (page 477)

Referring to the inventory data for Sedato Company in E9-3, assume that Sedato follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Item No. Quantity Cost per Unit Cost to Replace Estimated Selling Price Cost of Completion and Disposal Normal Profi t 1320 1,200 \(3.20 \)3.00 \(4.50 \)0.35 $1.25 1333 900 2.70 2.30 3.50 0.50 0.50 1426 800 4.50 3.70 5.00 0.40 1.00 1437 1,000 3.60 3.10 3.20 0.25 0.90 1510 700 2.25 2.00 3.25 0.80 0.60 1522 500 3.00 2.70 3.80 0.40 0.50 1573 3,000 1.80 1.60 2.50 0.75 0.50 1626 1,000 4.70 5.20 6.00 0.50 1.00 Instructions From the information above, determine the amount of Sedato Company inventory

Short Answer

Expert verified

The inventory value equals $24,110.

Step by step solution

01

Estimation of market value per unit

Market value per unit is shown as follows:

Item No.

Selling Price

Cost of completion and disposal

Normal profit

NRV

(Selling price-Cost of completion and disposal)

NRV less normal profit

(NRV -Normal profit)

Cost to replace

Designated Market value

1320

$4.50

$0.35

$1.25

$4.15

$2.90

$3.00

$3.00

1333

3.50

0.50

0.50

3.00

2.50

2.30

2.50

1426

5.00

0.40

1.00

4.60

3.60

3.70

3.70

1437

3.20

0.25

0.90

2.95

2.05

3.10

2.95

1510

3.25

0.80

0.60

2.45

1.85

2.00

2.00

1522

3.80

0.40

0.50

3.40

2.90

2.70

2.90

1573

2.50

0.75

0.50

1.75

1.25

1.60

1.60

1626

6.00

0.50

1.00

5.50

4.50

5.20

5.20

02

Calculation of Inventory

Inventory value is calculated as follows:

Item No.

Quantity

Cost per unit

Designated Market value

Lower of cost-or-market

Inventory

1320

1,200

$3.20

$3.00

$3.00

$3,600

1333

900

2.70

2.50

2.50

2,250

1426

800

4.50

3.70

3.70

2,960

1437

1,000

3.60

2.95

2.95

2,950

1510

700

2.25

2.00

2.00

1,400

1522

500

3.00

2.90

2.90

1,450

1573

3,000

1.80

1.60

1.60

4,800

1626

1,000

4.70

5.20

4.70

4,700

Total

$24,110

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