Nine Company uses FIFO to account for inventory. Nine Company\'s inventory consi
ID: 2406420 • Letter: N
Question
Nine Company uses FIFO to account for inventory. Nine Company's inventory consists of two products: Product A and Product B. For each product, costs to sell include sales commissions of 10% of the selling price and shipping costs equal to 5% of the selling price. The accounting system revealed the following information as of December 31, 2018.
Determine the amount that Nine Company should report for inventory for Product A as of December 31, 2018.
Product Units Cost per unit Price per unit A 1,000 $40 $60 B 1,500 90 100Explanation / Answer
Net realizable value of Product A = Price per unit-Sales commissions-Shipping costs = 60-(60*10%)-(60*5%)= $51 Inventory is valued at lower of cost or Net Realizable value Lower of $40 or $51 is $40 Amount that Nine Company should report for inventory for Product A = 1000*40 = $40000
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