Mulligan Imports resells five major brands of golf clubs, which are noted in the following table. At the end of its reporting year, Mulligan calculates the lower of its cost or net realizable value in the following table:
|
Product Line |
Quantity on Hand |
Unit Cost |
Inventory at Cost |
Market Per Unit |
Lower of Cost or Market |
|
Free Swing |
1,000 |
$190 |
$190,000 |
$230 |
$190,000 |
|
Golf Elite |
750 |
140 |
105,000 |
170 |
105,000 |
|
Hi-Flight |
200 |
135 |
27,000 |
120 |
24,000 |
|
Iridescent |
1,200 |
280 |
336,000 |
160 |
192,000 |
|
Titanium |
800 |
200 |
160,000 |
215 |
160,000 |
Based on the table, the market value is lower than cost on the Hi-Flight and Iridescent product lines. Consequently, Mulligan recognizes a loss on the Hi-Flight product line of $3,000 ($27,000 – $24,000), as well as a loss of $144,000 ($336,000 – $192,000) on the Iridescent product line.