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Chapter 9: Question 1E (page 476)

The inventory of Oheto Company on December 31, 2017, consists of the following items. Part Quantity Cost per Unit Net Realizable Value 110 600 \( 95 \)100 111 1,000 60 52 112 500 80 76 113 200 170 180 120 400 205 208 121a 1,600 16 1 122 300 240 235 a Part No. 121 is obsolete and has a realizable value of $1 each as scrap. Instructions 1. Determine the inventory as of December 31, 2017, by the LCNRV method, applying this method to each item. 2. Determine the inventory by the LCNRV method, applying the method to the total of the inventory.

Short Answer

Expert verified

(a) Value of inventory is $335,100.

(b) Value of inventory is $341,300.

Step by step solution

01

Schedule for LCNRV

Part No.

Quantity

Cost

Net realizable value

Total Cost

Total net realizable value

LCNRV

110

600

$95

$100

$57,000

$60,000

$57,000

111

1,000

60

52

60,000

52,000

52,000

112

500

80

76

40,000

38,000

38,000

113

200

170

180

34,000

36,000

34,000

120

400

205

208

82,000

83,200

82,000

121

1,600

16

1

25,600

1,600

1,600

122

300

240

235

72,000

70,500

70500

Totals

$370.600

$341,300

$335,100

02

Inventory value by each item basis

(a) The value of inventory as of December 31, 2017, per LCNRV applied to each item equals $335,100.

03

Inventory value by the total inventory basis

(b) The total cost of the inventory equals $370,600, and the total net realizable value equals $341,300. Hence, per the LCNRV method, the value of inventory equals $341,300 as it is the lowest between the two.

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Most popular questions from this chapter

Presented below is information related to Knight Enterprises. Jan. 31 Feb. 28 Mar. 31 Apr. 30 Inventory at cost \(15,000 \)15,100 \(17,000 \)14,000 Inventory at LCNRV 14,500 12,600 15,600 13,300 Purchases for the month 17,000 24,000 26,500 Sales for the month 29,000 35,000 40,000 Instructions (a) From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the statement at cost; the gain or loss due to market fluctuations is to be shown separately (using a valuation account). (b) Prepare the journal entry required to establish the valuation account at January 31 and entries to adjust it monthly thereafter. E9-6 (L01) (LCNR

John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2018. The company recomputed its ending inventory for 2017 in accordance with the procedures necessary to switch to LIFO retail. The inventory computed was \(212,600. Instructions Assuming that John Olerud Ltd.’s ending inventory for 2017 under the conventional retail inventory method was \)205,000, prepare the appropriate journal entry on January 1, 2018.

On April 15, 2018, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared. STANISLAW CORPORATION MARCH 31, 2018 Dr. Cr. Cash \( 20,000 Accounts receivable 40,000 Inventory, December 31, 2017 75,000 Land 35,000 Buildings 110,000 Accumulated depreciation \) 41,300 Equipment 3,600 Accounts payable 23,700 Other accrued expenses 10,200 Common stock 100,000 Retained earnings 52,000 Sales revenue 135,000 Purchases 52,000 Miscellaneous expense 26,600 . \(362,200 \)362,200The following data and information have been gathered. 1. The fiscal year of the corporation ends on December 31. 2. An examination of the April bank statement and canceled checks revealed that checks written during the period April 1–15 totaled \(13,000: \)5,700 paid to accounts payable as of March 31, \(3,400 for April merchandise shipments, and \)3,900 paid for other expenses. Deposits during the same period amounted to \(12,950, which consisted of receipts on account from customers with the exception of a \)950 refund from a vendor for merchandise returned in April. 3. Correspondence with suppliers revealed unrecorded obligations at April 15 of \(15,600 for April merchandise shipments, including \)2,300 for shipments in transit (f.o.b. shipping point) on that date. 4. Customers acknowledged indebtedness of \(46,000 at April 15, 2018. It was also estimated that customers owed another \)8,000 that will never be acknowledged or recovered. Of the acknowledged indebtedness, \(600 will probably be uncollectible. 5. The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation’s audited financial statements disclosed this information: Year Ended December 31 2017 2016 Net sales \)530,000 \(390,000 Net purchases 280,000 235,000 Beginning inventory 50,000 66,000 Ending inventory 75,000 50,000 6. Inventory with a cost of \)7,000 was salvaged and sold for $3,500. The balance of the inventory was a total loss. Instructions Prepare a schedule computing the amount of inventory fire loss. The supporting schedule of the computation of the gross profit should be in good form.

Question:Amiras Corporation began operations on January 1, 2017, with a beginning inventory of \(30,100 at cost and \)50,000 at retail. The following information relates to 2017. Retail Net purchases (\(108,500 at cost) \)150,000 Net markups 10,000 Net markdowns 5,000 Sales revenue 126,900 Instructions (a) Assume Amiras decided to adopt the conventional retail method. Compute the ending inventory to be reported in the balance sheet. (b) Assume instead that Amiras decides to adopt the dollar-value LIFO retail method. The appropriate price indexes are 100 at January 1 and 110 at December 31. Compute the ending inventory to be reported in the balance sheet. (c) On the basis of the information in part (b), compute cost of goods sold.

Question:What approaches may be employed in applying the LCNRV procedure? Which approach is normally used and why?
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