Question

Konan, Inc. needs to determine its inventory value. The following information pertains to the individual products in ending inventory:

Product	Cost	Replacement Cost	Selling Price	Cost of Completion	Normal Profit
L-19	$40	$38	$50	$2	$11
M-23	52	40	60	10	8
N-05	20	24	30	2	6

A) Assuming Konan uses the FIFO method for costing its inventory, the net realizable value for product L-19 is

B) Assuming Konan uses the FIFO method for costing its inventory, the reported value of product M-23 is

C) Assuming Konan uses the FIFO method for costing its inventory, writedown of inventory value for item M-23 is

D) Assuming Konan uses the FIFO method for costing its inventory, the writedown of inventory value for Product N-05 is

Answer 1

Answer-A)-$48

Explanation:
Net realizable value = selling price-cost of completion

=$50 − $2

= $48

B)-$50

Explanation:
Net realizable value = selling price− cost of completion

= $60-$10

= $50.

Cost = $52. LCNRV =Higher of cost or Net realizable value

=$52 or $50

=$50

C)-$2

Explanation:
Net realizable value = selling price − cost of completion
=$60 - $10

=$50
Cost = $52. LCNRV = $50.

Writedown to reduce cost to NRV = $2.

D)-$0

Explanation:
Net realizable value = selling price − cost of completion

=$30- $2

= $28.

Cost = $20; LCNRV = $20.

Therefore, there is no writedown.

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