PR 7-4B Lower-of-cost-or-market inventory

Data on the physical inventory of Chiron Co. as of December 31, 2012, are presented in the working papers. The quantity of each commodity on hand has been determined and recorded on the inventory sheet. Unit market prices have also been determined as of December 31 and recorded on the sheet. The inventory is to be determined at cost and also at the lower of cost or market, using the first-in, first-out method. Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows:

Last

Next-to-the-Last

Purchases Invoice

Purchases Invoice

Quantity

Unit

Quantity

Unit

Description

Purchased

Cost

Purchased

Cost

Alpha

30

$60

40

$59

Beta

25

170

15

180

Charlie

20

130

15

128

Echo

150

25

100

27

Frank

6

550

15

540

George

90

16

100

15

Killo

8

395

4

394

Quebec

500

6

500

7

Romeo

75

25

80

26

Sierra

5

250

4

260

Whiskey

100

17

115

16

X-Ray

10

750

8

740

Instructions

Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item:

1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase.

2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase.

3. Total the cost and market columns and insert the lower of the two totals in the Lower of C or M column. The first item on the inventory sheet has been completed as an example.