Thursday 7 May 2015

Herman Company has three products in its ending inventory. Specific per unit data for each of the products are as follows:

Herman Company has three products in its ending inventory. Specific per unit data for each of the products are as follows:


  Product 1 Product 2 Product 3
  Cost $ 20   $ 90   $ 50  
  Replacement cost   18     85     40  
  Selling price   40     120     70  
  Disposal costs   6     40     10  
  Normal profit margin   5     30     12  



Required:
What unit values should Herman use for each of its products when applying the LCM rule to ending inventory assuming it prepares financial statements according to International Financial Reporting Standards?

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Explanation:

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