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Chapter 9: Question P9-1 (page 482)

Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2017, the following finished desks (10 desks in each category) appear in the company’s inventory. Finished Desks A B C D 2017 catalog selling price \(45 \)48 \(90 \)105 FIFO cost per inventory list 12/31/17 47 45 83 96 Estimated cost to complete and sell 5 11 26 20 2018 catalog selling price 50 54 90 120 The 2017 catalog was in effect through November 2017, and the 2018 catalog is effective as of December 1; catalog prices are net of the usual discounts.

Short Answer

Expert verified

The inventory value per LCNRV is $2,260.

Step by step solution

01

Calculation of net realizable value

Net realizable value is calculated as follows:

A

B

C

D

Selling price

$45

$48

$90

$105

Less: Cost to complete and sell

5

11

26

20

Net realizable value per unit (NRV)

$40

$37

$64

$85

02

Calculation of inventory value per LCNRV

Inventory value per LCNRV is calculated as follows:

Units

Cost

NRV

LCNRV (Per Unit)

LCNRV (Total)

A

10

$47

$40

$40

$400

B

10

45

37

37

370

C

10

83

64

64

640

D

10

96

85

85

850

$2,260

Thus, inventory value equals $2,260.

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Most popular questions from this chapter

Referring to the situation in P9-2 for Garcia Home Improvement Company, consider the following expanded data at May 31, 2017. Assume Garcia uses LIFO inventory costing. Problems 483 Replacement Sales Net Realizable Normal Cost Cost Price Value Profi t Aluminum siding \( 70,000 \) 62,500 \( 64,000 \) 56,000 \( 5,100 Cedar shake siding 86,000 79,400 94,000 84,800 7,400 Louvered glass doors 112,000 124,000 186,400 168,300 18,500 Thermal windows 140,000 126,000 154,800 140,000 15,400 Total \)408,000 \(391,900 \)499,200 \(449,100 \)46,400 Instructions (a) (1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2017. (2) For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market. (b) Explain the rationale for the use of the lower-of-cost-or-market rule as it applies to inventories

Use the information for Kemper Company from BE9-7. In 2018, Kemper paid \(1,000,000 to obtain the raw materials which were worth \)950,000. Prepare the entry to record the purchase

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.

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?

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

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