1460T_c09.qxd01:09:200609:04 AM Page453 EQA Exercises·453 Instructions (a)Determine the inventory as of December 31,2008,by the lower-of-cost-or-market method, applying this method directly to each item. (b)Determine the inventory by the lower-of-cost-or-market method,applying the method to the total of the inventory. (L01, E9-2 (Lower-of-Cost-or-Market)Smashing Pumpkins Company uses the lower-of-cost-or-market 2) method,on an individual-item basis,in pricing its inventory items.The inventory at December 31,2008, consists of products D,E,F,G,H,and I.Relevant per-unit data for these products appear below. Item Item Item Item D E G H Estimated selling price $120 $110 95 $90 $110 $90 Cost 75 0 80 0 Replacement cost 120 72 70 30 70 30 Estimated selling expense 30 30 30 25 30 30 Normal profit 20 20 20 20 20 20 Instructions Using the lower-of-cost-or-market rule,determine the proper unit value for balance sheet reporting pur- poses at December 31,2008,for each of the inventory items above. (L0 1,E9-3 (Lower-of-Cost-or-Market)Michael Bolton Company follows the practice of pricing its inventory 2) at the lower-of-cost-or-market,on an individual-item basis. Item ●ost Cost to Estimated Cost of Completion Normal No. Quantity per Unit Replace Selling Price and Disposal Profit 1320 1,200 $3.20 $3.00 $4.50 $0.35 $1.25 1333 900 270 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 3.000 180 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 Bolton Company inventory. (L0 1,E9-4 (Lower-of-Cost-or-Market-Journal Entries)Corrs Company began operations in 2007 and de- 2) termined its ending inventory at cost and at lower-of-cost-or-market at December 31,2007,and December 31,2008.This information is presented below. Cost Lower-of-Cost-or-Market 12/31/07 $346,000 $327,000 12/31/08 410,000 395,000 Instructions (a)Prepare the journal entries required at December 31,2007,and December 31,2008,assuming that the inventory is recorded at market,and a perpetual inventory system (direct method)is used. (b)Prepare journal entries required at December 31,2007,and December 31,2008,assuming that the inventory is recorded at cost and an allowance account is adjusted at each year-end under a per- petual system. (c)Which of the two methods above provides the higher net income in each year? (L0 1.E9-5 (Lower-of-Cost-or-Market-Valuation Account)Presented below is information related to Can- 2) dlebox Enterprises. Jan.31 Feb.28 Mar.31 Apr.30 Inventory at cost $15,000 $15,100 $17,000 $13.000 Inventory at the lower-of-cost-or-market 14,500 12,600 15,600 12,300 Purchases for the month 20,000 24.000 26,500 Sales for the month 29,000 35.000 40,000 Instructions (a)From the information,prepare (as far as the data permit)monthly income statements in colum- nar form for February,March,and April.The inventory is to be shown in the statement at cost,Instructions (a) Determine the inventory as of December 31, 2008, by the lower-of-cost-or-market method, applying this method directly to each item. (b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory. E9-2 (Lower-of-Cost-or-Market) Smashing Pumpkins Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2008, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Item Item Item Item Item Item D E FGH I Estimated selling price $120 $110 $95 $90 $110 $90 Cost 75 80 80 80 50 36 Replacement cost 120 72 70 30 70 30 Estimated selling expense 30 30 30 25 30 30 Normal profit 20 20 20 20 20 20 Instructions Using the lower-of-cost-or-market rule, determine the proper unit value for balance sheet reporting pur￾poses at December 31, 2008, for each of the inventory items above. E9-3 (Lower-of-Cost-or-Market) Michael Bolton Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Item Cost Cost to Estimated Cost of Completion Normal No. Quantity per Unit Replace Selling Price and Disposal Profit 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 Bolton Company inventory. E9-4 (Lower-of-Cost-or-Market—Journal Entries) Corrs Company began operations in 2007 and de￾termined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2007, and December 31, 2008. This information is presented below. Cost Lower-of-Cost-or-Market 12/31/07 $346,000 $327,000 12/31/08 410,000 395,000 Instructions (a) Prepare the journal entries required at December 31, 2007, and December 31, 2008, assuming that the inventory is recorded at market, and a perpetual inventory system (direct method) is used. (b) Prepare journal entries required at December 31, 2007, and December 31, 2008, assuming that the inventory is recorded at cost and an allowance account is adjusted at each year-end under a per￾petual system. (c) Which of the two methods above provides the higher net income in each year? E9-5 (Lower-of-Cost-or-Market—Valuation Account) Presented below is information related to Can￾dlebox Enterprises. Jan. 31 Feb. 28 Mar. 31 Apr. 30 Inventory at cost $15,000 $15,100 $17,000 $13,000 Inventory at the lower-of-cost-or-market 14,500 12,600 15,600 12,300 Purchases for the month 20,000 24,000 26,500 Sales for the month 29,000 35,000 40,000 Instructions (a) From the information, prepare (as far as the data permit) monthly income statements in colum￾nar form for February, March, and April. The inventory is to be shown in the statement at cost, Exercises • 453 (L0 1, 2) (L0 1, 2) (L0 1, 2) (L0 1, 2) 1460T_c09.qxd 01:09:2006 09:04 AM Page 453