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Chapter 9: Question 2BE (page 475)

Floyd Corporation has the following four items in its ending inventory. Item Cost Net Realizable Value (NRV) Jokers \(2,000 \)2,100 Penguins 5,000 4,950 Riddlers 4,400 4,625 Scarecrows 3,200 3,830 Determine the following: (a) the LCNRV for each item, and (b) the amount of write-down, if any, using (1) an item-by-item LCNRV evaluation and (2) a total category LCNRV evaluation

Short Answer

Expert verified

The LCNRV for item-by-item basis equals $14,550, and per total category, it equals $14,600.

The written in case of item-by-item basis equals $50, and per total category, it equals $0.

Step by step solution

01

Calculation of LCNRV for item-by-item basis and total category basis

(a) (1 & 2) LCNRV is calculated as follows:

Item

Cost

NRV

LCNRV

Item-by-Item

Total Category

Jokers

$2,000

$2,100

$2,000

Penguins

5,000

4,950

4,950

Riddlers

4,400

4,625

4,400

Scarecrows

3,200

3,830

3,200

Total

$14,600

$15,505

$14,550

$14,600

02

Calculation of amount written down as per the item-by-item basis.

(b) (1)

Amount written down per item-by-item basis is calculated as follows:

AmountWrittenDownasPerItembyItembasis=TotalCost-LCNRVasPerItem-byItembasis=$14,600-$14,550=$50

03

Calculation of amount written down per total category basis

(b) (2)

Amount written down per total category basis is calculated as follows:

Amountwrittendownpertotalcategorybasis=TotalCost-LCNRVasPerTotalCategorybasis=$14,600-$14,600=$0

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