Boulevard Home Furnishings had the following balances and transactions during 2018. $$\begin{array} { | l | l | }
\hline \text { Beginning Inventory } & \text { 20 units at \$74 } \
\hline \text { Tune } 10 & \text { Purchased } 40 \text { units at \$84 } \
\hline \text { December 30 } & \text { Sold 30 units } \
\hline \text { December 31 } & \text { Replacement cost \$86 } \
\hline
\end{array}$$ 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 31,2018 using the lower-of-cost-or-market rule.

Question

Boulevard Home Furnishings had the following balances and transactions during 2018. $$\begin{array} { | l | l | } 
\hline \text { Beginning Inventory } & \text { 20 units at \$74 } \
\hline \text { Tune } 10 & \text { Purchased } 40 \text { units at \$84 } \
\hline \text { December 30 } & \text { Sold 30 units } \
\hline \text { December 31 } & \text { Replacement cost \$86 } \
\hline
\end{array}$$ 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 31,2018 using the lower-of-cost-or-market rule.

Quizplus · Accepted Answer

Under FIFO, the ending inventory consists of the most recent purchases. After selling 30 units, 30 units remain (10 from the beginning inventory and 20 from the purchase). The cost of these 30 units is 10 units at $84 and 20 units at $84, totaling $2,520. Since the replacement cost ($86) is higher than the cost, the lower-of-cost-or-market rule uses the cost.

Boulevard Home Furnishings Had the Following Balances and Transactions During