Lower of cost or market
Leaders Company has five products in its inventory. Information about the December 31,2011, inventory follows.
Product Quantity Unit Cost Unit Replacement Cost Unit Selling Price
A 1,000 $10 $12 $16
B 800 15 11 18
C 600 3 2 8
D 200 7 4 6
E 600 14 12 13
The selling cost for each product consists of a 15 percent sales commission. The normal profit percentage for each product is 40 percent of the selling price.
Required:
1-Determine the balance sheet inventory carrying value at December 31,2011 assuming the LCM rule is applied to individual products.
2-Determine the balance sheet inventory carrying value at December 31, 2011, assuming the LCM rule is applied to the entire inventory, Also, assuming that Leaders recognizes an inventory write -down as a separate income statement item, determine the amount of the loss.