Lower of Cost or Net Realizable Value Novellis Nursery has developed the followi

Question

Lower of Cost or Net Realizable Value Novellis Nursery has developed the following data in order to calculate the lower of cost or net realizable value for its products. The individual products are listed within the categories of trees. Selling PriceCost Broad leaf trees: Ash Beech Needle leaf trees: Cedar Fir Fruit trees: Apple Cherry $1,800 $1,700 2,200 1,600 $2,500 $1,750 3,600 3,350 $1,800 $1,400 2,300 1,800 The costs to sell are 10% of selling price 1. Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to individual trees 2. Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to categories of trees 3. Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to the total inventory

Explanation / Answer

Cost NRV Lower of cost or NRV Broad leaf trees: Ash 1700 1620 1620 Beech 1600 1980 1600 Sub-total 3300 3600 3220 Needle leaf trees: Cedar 1750 2250 1750 Fir 3350 3240 3240 Sub total 5100 5490 4990 Fruit trees: Apple 1400 1620 1400 Cherry 1800 2070 1800 Sub total 3200 3690 3200 Total 11600 12780 11410 1 Reported inventory value = $11410 2 Reported inventory value =3300+5100+3200= $11600 3 Reported inventory value =11600

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