Williams Inc.had the following balances and transactions during 2014. The company maintains its records of inventory on a perpetual basis using the last-in,first-out method.Calculate the amount of ending Merchandise Inventory at December 31,2014 using the lower-of-cost-or-market rule.

Question

Williams Inc.had the following balances and transactions during 2014.  The company maintains its records of inventory on a perpetual basis using the last-in,first-out method.Calculate the amount of ending Merchandise Inventory at December 31,2014 using the lower-of-cost-or-market rule.

Quizplus · Accepted Answer

Using the last-in, first-out method:
- The cost of goods sold for 2014 = $13,200 (10 units x $1,000 + 4 units x $800)
- The cost of the remaining inventory at December 31, 2014 is based on the cost of the 3 units purchased on December 12, 2014, which is $840 (3 units x $280).
- The market value of the inventory is given as $1,020.
- The lower-of-cost-or-market rule means that the inventory should be valued at the lower of cost ($840) or market value ($1,020).
- Therefore, the ending Merchandise Inventory at December 31, 2014 is $840.