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Chapter 9: Q6IFRS. (page 500)

Riegel Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, consists of products D, E, F, G, H, and I. Relevant per unit data for these products appear below. Using the LCNRV rule, determine the proper unit value for statement of financial position reporting purposes at December 31, 2017, for each of the inventory items above.

Short Answer

Expert verified

The cost of inventory for Item D equals $50, Item E equals $62, Item F equals $60, Item G equals $35, Item H equals $50, and Item I equals $30

Step by step solution

01

Calculation of net realizable value

The net realizable value is calculated as follows:

Item D

Item E

Item F

Item G

Item H

Item I

Selling Price

$120

$110

$95

$90

$110

$90

Less: Estimated cost to complete

30

30

25

35

30

30

Less: Estimated cost to sell

40

18

10

20

10

30

Net realizable value

$50

$62

$60

$35

$70

$30

02

Calculation of inventory price

The inventory price is calculated as follows:

Item D

Item E

Item F

Item G

Item H

Item I

Cost

$75

$80

$80

$80

$50

$36

Net realizable value

50

62

60

35

70

30

LCNRV

$50

$62

$60

$35

$50

$30

Thus, the cost of inventory from Item D to I equals $50, $62, $60, $35, $50, and $30, respectively.

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Most popular questions from this chapter

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

Kumar Inc. uses a perpetual inventory system. At January 1, 2017, inventory was \(214,000,000 at both cost and net realizable value. At December 31, 2017, the inventory was \)286,000,000 at cost and $265,000,000 at net realizable value. Prepare the entry under (a) the cost-of-goods-sold method and (b) the loss method.

Question:Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost togross profit percentages based on sales price: 25% and 331 /3%. Convert the following gross profit percentages based on sales price to gross profit percentages based on cost: 331 /3% and 60%.

As of January 1, 2017, Aristotle Inc. adopted the retail method of accounting for its merchandise inventory. To prepare the store’s financial statements at June 30, 2017, you obtain the following data. Cost Selling Price Inventory, January 1 \( 30,000 \) 43,000 Markdowns 10,500 Markups 9,200 Markdown cancellations 6,500 Markup cancellations 3,200 Purchases 104,800 155,000 Sales revenue 154,000 Purchase returns 2,800 4,000 Sales returns and allowances 8,000 Instructions (a) Prepare a schedule to compute Aristotle’s June 30, 2017, inventory under the conventional retail method of accounting for inventories. (b) Without prejudice to your solution to part (a), assume that you computed the June 30, 2017, inventory to be $59,400 at retail and the ratio of cost to retail to be 70%. The general price level has increased from 100 at January 1, 2017, to 108 at June 30, 2017. Prepare a schedule to compute the June 30, 2017, inventory at the June 30 price level under the dollarvalue LIFO retail method. (AICPA adapted)

Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory, May 1 $ 160,000 Purchases (gross) 640,000 Freight-in 30,000 Sales revenue 1,000,000 Sales returns 70,000 Purchase discounts 12,000 Instructions (a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. (b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.
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