haileysolis5
19.03.2021 •
Business
A local Chevrolet dealership carries the following types of vehicles:
Inventory Items Quantity Cost per Unit Market (replacement cost) per Unit
Vans 3 $22,000 $20,000
Trucks 6 17,000 16,000
2-door sedans 2 12,000 14,000
4-door sedans 7 16,000 19,000
Sports cars 3 32,000 35,000
SUVs 5 28,000 23,000
Because of recent increases in gasoline prices, the car dealership has noticed a reduced demand for its SUVs, vans, and trucks.
Required:
a. Compute the total cost of the entire inventory.
b. Determine whether each inventory item would be reported at cost or market. Multiply the quantity of each inventory item by the appropriate cost or market amount and place the total in the "Lower-of-Cost-or-Market" column. Then determine the total for that column.
c. Compare your answers in Requirement 1 and Requirement 2 and then record any necessary adjustment to write down inventory from cost to market value.
d. Discuss the financial statement effects of using lower-of-cost-or-market to report inventory.
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Ответ:
Explanation:
Since the table doesn't show up correctly, the first dollar value is the Cost per Unit of the vehicle, while the second dollar value is the Market Cost per Vehicle.
a. If we compute the cost using the Cost per Unit then they would be the following.
Vans: 3 * $22,000 = $66,000Trucks: 6 * $17,000 = $102,0002-Door Sedans: 2 * $12,000 = $24,0004-Door Sedans: 7 * $16,000 = $112,000Sports Cars: 3 * $32,000 = $96,000SUV's: 5 * $28,000 = $140,000Total Inventory: $504,000b. The "Lower-of-Cost-or-Market" basically states that whatever of the two prices is lower is ultimately the one that is recorded as the cost. Therefore, under this method the costs would be the following...(Purchase Cost or Market Cost)
Vans: 3 * $20,000 = $60,000 MarketTrucks: 6 * $16,000 = $96,000 Market2-Door Sedans: 2 * $12,000 = $24,000 Purchase Cost4-Door Sedans: 7 * $16,000 = $112,000 Purchase CostSports Cars: 3 * $32,000 = $96,000 Purchase CostSUV's: 5 * $23,000 = $115,000 MarketTotal Inventory: $504,000 Purchase Costc. There were only 3 changes made from from requirement 1 and 2 these were the changes in total cost...
Vans: $60,000 - $66,000 = - $6000Trucks: $96,000 - $102,000 = - $6000SUV's: $115,000 - $140,000 = - $25,000d. This allows companies to report losses at a much more reasonable and consistent way. Thus allowing profits to be more predictable.
Ответ:
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Explanation: