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Chapter 9: Q5IFRS. (page 500)

In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases. Cases 1 2 3 4 5 Cost \(15.90 \)16.10 \(15.90 \)15.90 $15.90 Sales price 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

Expert verified

The cost of inventory in case 1 equals $12.80, case 2 equals $16.10, case 3 equals $13, case 4 equals $9.20, and case 5 equals $15.90.

Step by step solution

01

Calculation of net realizable value

The net realizable value is calculated as follows:

Case1

Case 2

Case 3

Case 4

Case 5

Selling Price

$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

$9.20

$16.20

02

Calculation of inventory price

The inventory price is calculated as follows:

Case1

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

9.20

16.20

LCNRV

$12.80

$16.10

$13

$9.20

$15.90

Thus, the cost of inventory from Case 1 to case 5 equals $12.80, $16.10, $13, $9.20, and $15.90, respectively.

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Most popular questions from this chapter

Keyser’s Fleece Inc. holds a drove of sheep. Keyser shears the sheep on a semiannual basis and then sells the harvested wool into the specialty knitting market. Keyser has the following information related to the shearing sheep at January 1, 2017, and during the first six months of 2017. Shearing Sheep Carrying value (equal to net realizable value), January 1, 2017 $74,000 Change in fair value due to growth and price changes 4,700 Change in fair value due to harvest (575) Wool harvested during the fi rst 6 months (at NRV) 9,000 Prepare the journal entry(ies) for Keyser’s biological asset (shearing sheep) for the first six months of 2017

Question:What factors might call for inventory valuation at sales prices (net realizable value or market price)?

Dover Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below. Cost Net Realizable Value 12/31/17 \(346,000 \)322,000 12/31/18 410,000 390,000Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming that the inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method is used. (b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming that the inventory is recorded at cost and a perpetual system using the loss method is used. (c) Which of the two methods above provides the higher net income in each year?

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Deere and Company reported inventory in its balance sheet as follows. Inventories $1,999,100,000 What additional disclosures might be necessary to present the inventory fairly?
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