Question

Target usually calculates its inventory values using LIFO and in doing so, it came up with the following values for its shampoo, conditioner, and body wash products. Target's management team stated that starting this year, the company needs to value its inventory on Lower-of-Cost-or-Net Realizable Value instead.

Using the following information, identify what the dollar values of each of these inventory pieces would be on Target's financial statements and what method you used to value that product.

Inv. Item	Shampoo	Conditioner	Body Wash
Retail Value	$ 10	$ 11	$ 15
LIFO Value	$ 8	$ 7	$ 5
Selling Expense	$ 1	$ 1	$ 1
Cost to Finish	$2	$1	$3

Answer 1

	Inventory price in FS	Method
Shampoo	$7	Net Realizable value method
Conditioner	$7	Cost Price method (LIFO Value)
Bodywash	$5	Cost Price method (LIFO Value)

Lower of the cost or Net Realizable value whichever is lower has to be considerred

Calculation of Net Realizable value
	Shampoo	Conditioner	Bodywash
Selling price(Retail Value)	10	11	15
Less:- Selling expenses	-1	-1	-1
Less Cost to finish	-2	-1	-3
Net realizable value	7	9	11
LIFO VALUE(COST PRICE)	8	7	5