Pauline’s Plumbing sells kitchen sinks. The company had the following inventory quantities, per unit costs, and per unit market values (current replacement costs) at the end of a recent fiscal year.
(a) Compute Pauline’s Plumbing’s ending inventory by applying the lower-of-cost-or-market rule on an item-by-item basis.
(b) Briefly describes how the application of the LCM rule will affect the financial statement data of Pauline’s Plumbing.
(c) In your view, which of the following inventory valuation methods would provide the most relevant and reliable accounting data for external decision makers:
(1) Valuing inventories strictly on a cost basis.
(2) Valuing inventories strictly on a market basis.
(3) Valuing inventories on a lower-of-cost-or-market basis? Defend your choice.

  • CreatedMarch 27, 2015
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