At year end, CurlZ, Inc.’s inventory consists of 370 bottles of CleanZ at $3 per bottle and 270 boxes of DyeZ at $10 per box.

At year end, CurlZ, Inc.'s inventory consists of 370 bottles of CleanZ at $3 per bottle and 270 boxes of DyeZ at $10 per box. Market values are $3.20 per bottle for CleanZ and $8 per box for DyeZ. CurlZ should report its inventory at:

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  1. Curlz should report his inventory at a Total value of $3,270

    Explanation:

    In reporting inventory, the market values are only used when the price of a particular commodity or product falls below the purchase value.The inventory will therefor register a loss if the price falls. However, when the market value rises above the purchase value, we use the purchase value in our inventory since the rules of accounting do not allow for anticipated profits: they can only be reported once the sale is made and the market value at that point in time is higher than the purchase value.

    The inventory will include;

    Initial values;

    Number of bottles of Clean Z=370 bottles

    Price per bottle of clean Z=$3

    Number of boxes of Dye Z=270 boxes

    Price per Dye Z=$10

    Market values;

    Price per bottle of clean Z=$3.20

    Price per box of Dye Z=$8

    Inventory report;

    Since market value of clean Z ($3.20)is greater than its initial value ($3), then in our inventory we will use the lesser value=$3 per bottle for 370 bottles.

    Additionally, since market value of dye Z ($8) is lesser than its initial value ($10), then in our inventory we will use the lesser value=$8 per box for 270 boxes

    The total value of the inventory will be;

    Total value=(Number of bottles of Clean Z×price per bottle of clean Z)+(Number of boxes of Dye Z×price per Dye Z)

    where;

    Number of bottles of Clean Z=370 bottles

    price per bottle of clean Z=$3

    Number of boxes of Dye Z=270 boxes

    price per box of Dye Z=$8

    replacing;

    Total value=(370×3)+(270×8)=$3,270

    Total value=$3,270

  2. $3,270

    Explanation:

    Inventory should be value at lower of cost and market value.

    Bottles of CleanZ:

    Cost of inventory = Bottles of CleanZ × Price per bottle

                                 = 370 × $3

                                 = $1,110

    Market value of inventory:

    = Bottles of CleanZ × Market value per bottle

    = 370 × $3.20 per bottle

    = $1,184

    Lowest of cost and market value of inventory is $1,110.

    Boxes of DyeZ:

    Cost of inventory = Boxes of DyeZ × Price per box

                                 = 270 × $10

                                 = $2,700

    Market value of inventory:

    = Boxes of DyeZ × Market value per box

    = 270 × $8 per box

    = $2,160

    Lowest of cost and market value of inventory is $2,160.

    Therefore, the DyeZ. CurlZ should report its inventory at:

    = Lowest of cost and market value of inventor for (CleanZ + DyeZ)

    = $1,110 + $2,160

    = $3,270

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