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Jason Retail had the following balances and transactions during 2017
Jason Retail had the following balances and transactions during 2017. Beginning Inventory 20 units at $70 June 10 Purchased 40 units at $84 December 30 Sold 25 units December 31 Replacement cost $86 The company maintains its records of inventory on a perpetual basis using the FIFO inventory costing method. Calculate the amount of ending Merchandise Inventory at December 31, 2017 using the lower-of-cost-or-market rule. O A. $2,940 O B. $3,010 OC. $3,440 OD. $5,160
Expert Solution
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Correct Answer: Option A i.e. $2,940 |
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EXPLANATION: |
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Ending Inventory Units |
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Beginning Inventory Units |
20 |
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Add: Units Purchased |
40 |
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Less: Units Sold |
-25 |
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35 |
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i) |
Cost of Ending Inventory(FIFO) |
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Ending Inventory Units |
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Purchase Price Per Unit |
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35 |
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$84 |
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$2,940 |
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ii) |
Market Value of Ending Inventory |
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Ending Inventory Units |
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Replacement Cost Per Unit |
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35 |
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$86 |
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$3,010 |
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Based on Lower of Cost or Market Value, |
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the ending inventory would be i) OR ii) |
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whichever is Lower: |
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i.e. |
$2,940 |
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