Question

Determining Lower of Cost or Net Realizable Value (NRV) The following data refer to Froning Company’s...

Determining Lower of Cost or Net Realizable Value (NRV)

The following data refer to Froning Company’s ending inventory.

Item Code Quantity Unit Cost Unit NRV
LXC 500 $45 $48
KWT 180 38 34
MOR 300 22 20
NES 200 27 32

Determine the ending inventory amount by applying the lower of cost or net realizable value rule to:
(a) each item of inventory
$Answer

(b) the total inventory.
$Answer

Homework Answers

Answer #1

SOLUTION

INVENTORY IS RECOGNISED LOWER OF COST OR NET REALISABLE VALUE

PART A

LXC

COST = 500 X 45 = 22500

NRV = 500 X 48= 24000

LOWER = 22500 (ANSWER)

KWT

COST = 180 X 38= 6840

NRV = 180 X 34 = 6120

LOWER = 6120 (ANSWER)

MOR

COST= 300 X 22= 6600

NRV= 300 X 20= 6000

LOWER = 6000 (ANSWER)

NES

COST = 200 X 27= 5400

NRV = 200 X 32= 6400

LOWER = 5400 (ANSWER)

PART B

LOWER OF TOTAL INVENTORY COST OR NRV

TOTAL COST OF ALL ITEM = 22500+6840+6600+5400 = 41340

TOTAL NRV OF ALL ITEM = 24000+6120+6000+6400 = 42520

LOWER = 41340( ANSWER)

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