Help Se ecker Company has five products in its inventory Information about the D
ID: 2572112 • Letter: H
Question
Help Se ecker Company has five products in its inventory Information about the December 31, 2018, inventory follows. Selling Unit Cost 12 ct Quantity 1,100 $18 700 16 The cost to sell for each product consists of a 10 percent sales commission. Required: . Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or net realizable value (LCNRV) rule is I products. 2a. Determine the carrying value of inventory at December 31, 2018. assuming the LCNRV rule is applied to the entire inventory. 2b. Assuming the inventory write-downs are usual business practice for Decker, record any necessary year-end adjusting entry Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products Free 1 of 3 Next >Explanation / Answer
1) If the lower of cost or Net Realizable value rule is applied to individual products of Inventory then we will compare per unit cost and NRV of each individual product for valuation of inventory.
Carrying Value of Inventory at December 31,2018 (Amount in $)
Sales Commission
(10% of sale Price)
Net Realisable Value
(Sale Price-Sales commission)
Value of Inventory
(Quantity*Lower of NRV or cost)
The Net Realizable value of inventory is $41,670 which is lower than its cost (i.e.$43,900). Thus there will be decline in this case of $2,230 in the value of Inventory.
2a) If the Lower of cost or NRV rule is applied to the entire inventory, then we will compare the aggregate amount of cost or NRV of all the products of inventory.
Carrying Value of Inventory at December 31,2018 (Amount in $)
The lower of cost or NRV is $43,900 (i.e. cost) thus in this case there is no decline in cost
2c) Year End Adjusting entry (Amount in $) (for part 1)
Product Quantity Unit Cost Sale PriceSales Commission
(10% of sale Price)
Net Realisable Value
(Sale Price-Sales commission)
Lower of NRV or CostValue of Inventory
(Quantity*Lower of NRV or cost)
A 1,100 12 18 1.80 16.20 12 13,200 B 900 17 20 2 18 17 15,300 C 700 3 8 0.8 7.2 3 2,100 D 300 7 6 0.6 5.4 5.4 1,620 E 700 16 15 1.5 13.5 13.5 9,450 Total 41,670Related Questions
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