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Chapter 9: Q4Q (page 474)

Question:In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases using LCNRV. Cases 1 2 3 4 5 Cost \(15.90 \)16.10 \(15.90 \)15.90 $15.90 Sales value 14.80 19.20 15.20 10.40 17.80 Estimated cost to complete 1.50 1.90 1.65 .80 1.00 Estimated cost to sell .50 .70 .55 .40 .60

Short Answer

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Question:In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases using LCNRV. Cases 1 2 3 4 5 Cost $15.90 $16.10 $15.90 $15.90 $15.90 Sales value 14.80 19.20 15.20 10.40 17.80 Estimated cost to complete 1.50 1.90 1.65 .80 1.00 Estimated cost to sell .50 .70 .55 .40 .60

Step by step solution

01

Step-by-step-solutionStep1:

The net realizable value for each caseis calculated as follows:

Case 1

Case 2

Case 3

Case 4

Case 5

Sales Value

$14.80

$19.20

$15.20

$10.40

$17.80

Less: Estimated cost to complete

1.50

1.90

1.65

0.80

1.00

Less: Estimated cost to sell

0.50

0.70

0.55

0.40

0.60

Net realizable value

$12.80

$16.60

$13.00

$9.20

$16.20

02

Step 2:

The value of inventories for each case as per the LCNRV method is shown as follows:

Case 1

Case 2

Case 3

Case 4

Case 5

Cost

$15.90

$16.10

$15.90

$15.90

$15.90

Net realizable value

12.80

16.60

13.00

9.20

16.20

LCNRV

$12.80

$16.10

$13.00

$9.20

$15.90

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Most popular questions from this chapter

Question:Refer to the data in IFRS9-8 for Keyser’s Fleece Inc. Prepare the journal entries for (a) the wool harvested in the first six months of 2017, and (b) the wool harvested that is sold for $10,500 in July 2017.

All of the following are key differences between GAAP and IFRS with respect to accounting for inventories except the: (a) definition of the lower-of-cost-or-market test for inventory valuation differs between GAAP and IFRS. (b) average-cost method is prohibited under IFRS. (c) inventory basis determination for write-downs differs between GAAP and IFRS. (d) guidelines are more principles-based under IFRS than they are under GAAP.

(LCNRV—Error Effect) LaGreca Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, included product X. Relevant per-unit data for product X are as follows. Estimated selling price \(50 Cost 40 Estimated selling costs 14 Normal profi t 9 There were 1,000 units of product X on hand at December 31, 2017. Product X was incorrectly valued at \)38 per unit for reporting purposes. All 1,000 units were sold in 2018. Instructions Compute the effect of this error on net income for 2017 and the effect on net income for 2018, and indicate the direction of the misstatement for each year.

Question:What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss

Presented below is information related to Rembrandt Inc.’s inventory. (per unit) Skis Boots Parkas Historical cost \(190.00 \)106.00 $53.00 Selling price 212.00 145.00 73.75 Cost to sell 19.00 8.00 2.50 Cost to complete 32.00 29.00 21.25 Determine the following: (a) the net realizable value for each item, and (b) the carrying value of each item under LCN
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