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C 12 LCNRV - Problem Solving

The document provides information on several inventory valuation problems involving the lower of cost or net realizable value principle. It includes inventory data for multiple companies and products/materials with their corresponding unit costs and net realizable values. Journal entries are required to record the inventory adjustments needed to apply the lower of cost or net realizable value for ending inventory valuation.

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kyle mandaresio
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125 views1 page

C 12 LCNRV - Problem Solving

The document provides information on several inventory valuation problems involving the lower of cost or net realizable value principle. It includes inventory data for multiple companies and products/materials with their corresponding unit costs and net realizable values. Journal entries are required to record the inventory adjustments needed to apply the lower of cost or net realizable value for ending inventory valuation.

Uploaded by

kyle mandaresio
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Lower of Cost and Net Realizable Value – Problem Solving

1. Premiere Company showed the following inventory data: Required:


Units Unit Cost NRV Determine the inventory value at year-end, assuming the
Materials: entity applied the lower of cost and net realizable value.
R 1,000 110 100 5. Winter Company provided the following inventory data at the
S 2,000 250 260 end of first year of operations:
T 3,000 300 330 Cost NRV
Goods in process: Skis 2,200,000 2,500,000
X 4,000 500 480 Boots 1,700,000 1,500,000
Y 5,000 650 620 Ski Equipment 700,000 800,000
Finished Goods: Ski Apparel 400,000 500,000
A 2,000 800 790
B 2,000 730 780 Required:
Prepare journal entries to adjust the ending inventory under:
Required: A. Direct method
Determine the valuation of the inventory following the B. Allowance method
measurement at LCNRV. 6. On December 31, 2017, Naysayer Company has
2. The inventory of Horny Company at the end of the current outstanding purchase commitments for 10,000 gallons at
year is to be recorded at the lower of cost and net realizable P200 per gallon of raw material to be used in its
value. Ending inventory data per unit are summarized below: manufacturing process.
Estimated Required:
Item Units Cost sales price Cost of sell Prepare journal entry under each of the following
A 1,000 120 180 30 assumptions:
B 1,500 110 140 20 A. The market price on December 31, 2017 is P210.
C 1,200 150 170 30 B. It is expected that the market price will decline to P170
D 1,800 140 190 30 in early January 2018.
E 1,700 130 200 40 C. The market price on December 31, 2017 is P170.
D. The market price on December 31, 2017 is P170. On
Required: January 31, 2018 when the 10,000 gallon shipment is
Determine the inventory value applying the lower of cost and received, the market price is P150.
net realizable value. E. The market price on December 31, 2017 is P170. On
3. Prime Company manufactures and sell four products, the January 31, 2018 when the 10,000 gallon shipment is
inventories of which are priced at cost or net realizable value received, the market price is P210.
whichever is lower. A normal profit of 30% is usually
maintained on each product. The following information is
compiled at year-end:
Estimated Normal
Original Cost to selling selling
Product cost dispose price price
1 700 150 800 700
2 475 205 950 950
3 255 50 300 350
4 450 260 1,000 900
Required:
Determine the unit value for each product applying the lower of
cost and net realizable value in measuring inventory.
4. Prodigal Company provided the following inventory
information at year-end:
Appliances Car accessories
Product A Product B Product C Product D
Units on
hand 500 300 600 800
Unit Cost 2,500 3,700 1,400 2,100
NRV 2,700 3,600 2,000 2,000

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