Reporting Inventory at Lower of Cost or Market Sandals Company was formed on January 1, 2010, and is… 1 answer below »

Reporting Inventory at Lower of Cost or Market

Sandals Company was formed on January 1, 2010, and is preparing the annual financial statements dated December 31, 2010. Ending inventory information about the four major items stocked for regular sale follows:

 

 

Ending Inventory, 2010

 

Quantity

Unit Cost When

Market Value

Product Line

on Hand

Acquired (FIFO)

at Year-End

Air Flow

20

$12

$14

Blister Buster

75

40

38

Coolonite

35

55

50

Dudesly

10

30

35

Required:

1. Compute the amount that should be reported for the 2010 ending inventory using the LCM rule applied to each item.

2. How will the write-down of inventory to lower of cost or market affect the company’s expenses reported for the year ended December 31, 2010?

3. How would the methods used by Sandals Company to account for its inventory be affected by a switch from GAAP to IFRS?

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