Part A Adriana Lopez of Success Systems is evaluating her inventory to determine whether it must be

Question:

Part A

Adriana Lopez of Success Systems is evaluating her inventory to determine whether it must be adjusted based on lower of cost or market rules. Lopez has three different types of software in her inventory and the following information is available for each.

Required

1. Compute the lower of cost or market for ending inventory assuming Lopez applies the lower of cost or market rule to inventory as a whole. Must Lopez adjust the reported inventory value? Explain.

2. Assume that Lopez had instead applied the lower of cost or market rule to each product in inventory. Under this assumption, must Lopez adjust the reported inventory value? Explain.

Part B

Selected accounts and balances for the three months ended March 31, 2010, for Success Systems follows.

January 1 beginning inventory . . . . . . . . . $ 0

Cost of goods sold . . . . . . . . . . . . . . . . . 14,052

March 31 ending inventory . . . . . . . . . . . 704

Required

1. Compute inventory turnover and days’ sales in inventory for the three months ended March 31, 2010.

2. Assess the company’s performance if competitors average 10 times for inventory turnover and 29 days for days’ sales in inventory.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...