Smart Phones Company had the following balances and transactions during 2019. $$\begin{array} { | l | l | }
\hline \text { Beginning Inventory } & \text { 20 units at \$73 } \
\hline \text { Tune } 10 & \text { Purchased } 40 \text { units at \$76 } \
\hline \text { December 30 } & \text { Sold 33 units } \
\hline \text { December 31 } & \text { Replacement cost \$78 } \
\hline
\end{array}$$ The company maintains its records of inventory on a perpetual basis using the last-in,first-out inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2019 using the lower-of-cost-or-market rule.(Round any intermediate calculations two decimal places,and your final answer to the nearest dollar.)

Question

Smart Phones Company had the following balances and transactions during 2019. $$\begin{array} { | l | l | } 
\hline \text { Beginning Inventory } & \text { 20 units at \$73 } \
\hline \text { Tune } 10 & \text { Purchased } 40 \text { units at \$76 } \
\hline \text { December 30 } & \text { Sold 33 units } \
\hline \text { December 31 } & \text { Replacement cost \$78 } \
\hline
\end{array}$$ The company maintains its records of inventory on a perpetual basis using the last-in,first-out inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2019 using the lower-of-cost-or-market rule.(Round any intermediate calculations two decimal places,and your final answer to the nearest dollar.)

Quizplus · Accepted Answer

Under the LIFO (Last-In, First-Out) method, the last items purchased are the first ones to be sold. At the end of 2019, Smart Phones Company sold 33 units, leaving 27 units in inventory (20 units from the beginning inventory + 40 units purchased - 33 units sold = 27 units). The ending inventory would be composed of all 20 units from the beginning inventory and 7 units from the purchases made in June.The cost of the ending inventory under LIFO:- 20 units from beginning inventory at $73 each = 20 * $73 = $1,460- 7 units from June purchase at $76 each = 7 * $76 = $532Total ending inventory cost = $1,460 + $532 = $1,992The lower-of-cost-or-market rule requires that the inventory be reported at the lower of its cost or market (replacement) cost. The replacement cost is $78 per unit, which is higher than both the cost of the beginning inventory ($73) and the cost of the units purchased in June ($76). Therefore, the lower-of-cost-or-market rule does not reduce the inventory value, and the ending inventory is reported at its cost of $1,992.

Smart Phones Company Had the Following Balances and Transactions During