Question

Iris Company has provided the following information regarding two of its items of inventory at year-end:

• There are 100 units of Item A, having a cost of $20 per unit, a selling price of $24 and a cost to sell of $6 per unit.

• There are 50 units of Item B, having a cost of $50 per unit, a selling price of $56 and a cost to sell of $4 per unit.

How much is the ending inventory using lower of cost or net realizable value?

Answer 1

Step 1 -Total Net Realisable value of A & B

Item	Units	Selling Price (I)	Cost to sell (II)	Net Realisable value per unit (I-II) = III	Total Net realisable value = Net Realisable value per unit * No of units
A	100	24	6	18	1800
B	50	56	4	52	2600

Step - 2 Total Cost of Item A & B

Item	Units	Cost Per Unit	Total Cost
A	100	20	2000
B	50	50	2500

Step 3 - Comparision

ITEM	Cost	NRV	Lower of Cost or NRV	Ending Inventory
A	2000	1800	NRV	1800
B	2500	2600	Cost	2500
				4300

Ending Inventory = 4300