Ayayai Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, consists of products D, E, F, G, H, and I. Relevant per unit data for these products appear below.
Item D estimated selling price $137, cost $86, cost to complete $34, selling cost $11
Item E estimated selling price $125, cost $91, cost to complete $34, selling costs $21
Item F estimated selling price $108, cost $91, cost to complete $29, selling costs $11
Item G estimated selling price $103, cost $91, cost to complete $40, selling costs $23
Item H estimated selling price $125, cost $57, cost to complete $34, selling costs 11
Item I estimated selling price $103, cost $41,
cost to complete $34, selling costs 23
Using the LCNRV rule, determine the proper unit value
for balance sheet reporting purposes at December 31, 2017, for each
of the inventory items above.
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Ans. | ||||||||||
Product | Proper unit | |||||||||
D | 86 | |||||||||
E | 70 | |||||||||
F | 68 | |||||||||
G | 40 | |||||||||
H | 57 | |||||||||
I | 41 | |||||||||
*Calculation of LCNRV: | ||||||||||
Product | NRV | Cost | LCNRV | |||||||
D | 92 | 86 | 86 | |||||||
E | 70 | 91 | 70 | |||||||
F | 68 | 91 | 68 | |||||||
G | 40 | 91 | 40 | |||||||
H | 80 | 57 | 57 | |||||||
I | 46 | 41 | 41 | |||||||
*LCNRV = Lower-of-cost or Net Realizable Value | ||||||||||
*NRV or Cost which ever is less is selected as ending inventory under LCNRV. | ||||||||||
*Calculation of Net Realizable Value: | ||||||||||
Product | NRV | |||||||||
D | (137 - 34 - 11) | |||||||||
E | (125 - 34 - 21) | |||||||||
F | (108 - 29 - 11) | |||||||||
G | (103 - 40 - 23) | |||||||||
H | (125 - 34 - 11) | |||||||||
I | (103 - 34 - 23) | |||||||||
Net Realizable Value = Estimated selling price - Cost to complete - Selling costs | ||||||||||
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