[The following information applies to the questions displayed below.]
Castle TV,Inc.purchased 1,000 monitors on January 5 at a per-unit cost of $185,and another 1,000 units on January 31 at a per-unit cost of $230.In the period from February 1 through year-end,the company sold 1,800 units of this product.At year-end,200 units remained in inventory.
-Assume that the replacement cost of this monitor at year-end is $220 per unit.Using the FIFO flow assumption and the lower-of-cost-or-market rule,Castle TV should write down the carrying value of this inventory by:
A)$0.
B)$1,000.
C)$2,000.
D)$3,000.

Question

Quizplus · Accepted Answer

Using the FIFO flow assumption, the 200 units remaining in inventory at year-end are assumed to come from the January 31 purchase at a cost of $230 per unit. However, since the replacement cost at year-end is lower at $220 per unit, the inventory should be written down to the lower of cost ($230) or market ($220) which results in a write-down of $10 per unit. Therefore, the total write-down would be $2,000 (200 units * $10 per unit).

[The Following Information Applies to the Questions Displayed Below