Question

You are provided with the following information with regards to the ending inventory of an entity:...

You are provided with the following information with regards to the ending inventory of an entity:

Inventory Item #

Cost

Net Realizable Value

A500

$33708

$49453

A550

59391

51882

A575

49441

34113

At what value will the ending inventory be reported on the balance sheet?

Select one:

a. $135448

b. $142540

c. $127212

d. $119703

Business   Accounting   
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Homework Answers

Answer #1

Option (c)

$119703

All amounts in $

Inventory Item # Cost Net Realizable Value Reporting Value(ending)
A500 $33708 $49453 33708
A550 59391 51882 51882
A575 49441 34113 34113
$119703

accountants evaluate inventory and employ lower of cost or net realizable value considerations. This simply means that if inventory is carried on the accounting records at greater than its net realizable value (NRV), a write-down from the recorded cost to the lower NRV would be made. In essence, the Inventory account would be credited, and a Loss for Decline in NRV would be the offsetting debit. This debit would be reported in the income statement as a charge against (reduction in) income.

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