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Chapter 9: Question 1BE (page 474)

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

Short Answer

Expert verified

(a) Net realizable value per unit for Skis, Boots, and Parkas equals $161, $108, and $50, respectively.

(b) Carrying value per unit for Skis, Boots, and Parkas equals $161, $106, and $50, respectively.

Step by step solution

01

Calculate net realizable value for each item

(a) Net realizable value for each item is calculated as follows:

Skis

Boots

Parkas

Selling price

$212

$145

$73.75

Less: Cost to sell

19

8

2.50

Less: Cost to complete

32

29

21.25

Net Realizable Value

$161

$108

$50

02

Calculate carrying value of each item using LCNRV

(b) Carrying value of each item using LCNRV is calculated as follows:

Skis

Boots

Parkas

Historical Cost

$190

$106

$53

Net Realizable Value

161

108

50

Carrying Value as per LCNRV

$161

$106

$50

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Most popular questions from this chapter

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 12/31/18 410,000 390,000 Instructions (a) Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. (b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual system using the loss method. (c) Which of the two methods above provides the higher net income in each year?

Starfish Company (a company using GAAP and the LIFO inventory method) is considering changing to IFRS and the FIFO inventory method. How would a comparison of these methods affect Starfish’s financials? (a) During a period of inflation, working capital would decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. (b) During a period of inflation, the taxes will decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. During a period of inflation, net income would be greater if IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. (d) During a period of inflation, the current ratio would decrease when IFRS and the FIFO inventory methodare used as compared to GAAP and LIFO.

Fosbre Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was \(150,000, and purchases for January through April totaled \)500,000. Sales revenue for the same period was $700,000. Fosbre’s normal gross profit percentage is 35% on sales. Using the gross profit method, estimate Fosbre’s April 30 inventory that was destroyed by fire.

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.

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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