The Warren Company Uses the Perpetual Inventory System and Has

question 64

Short Answer

The Warren Company uses the perpetual inventory system and has computed the cost of its inventory to be $12,800 as follows: 200 units of Product A at a unit cost of $20;300 units of Product B at a unit cost of $24;and 100 units of Product C at a unit cost of $16.The current replacement cost of each of the above items is $25,$22 and $14,respectively.Warren's accountant is not sure yet whether to apply the lower-of-cost-or-market rule by individual items or by the entire stock in aggregate.Indicate whether each of the following statements pertaining to the Warren Company is true or false.
_____ a)When referring to Product B,the "cost" totals $7,200.
_____ b)If Warren selects to apply the lower-of-cost-or-market rule by individual items,Product A would be listed at $25 per unit.
_____ c)Warren would record a write-down of inventory it is uses the individual items approach,but would not have a write-down if it uses the aggregate approach.
_____ d)If Warren uses the individual items approach,$12,000 will be reported for inventory on the balance sheet.
_____ e)For Product C,the lower of cost or market is $1,600.

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