Question

In: Accounting

Norton Corporation uses the Lower-of-Cost-or-Market (LCM) method, on an individual-item basis, in pricing its inventory items....

Norton Corporation uses the Lower-of-Cost-or-Market (LCM) method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2020, consists of products G, H, I, J, K, L, M and N. Relevant per unit data for these products appear below.

Required: Compute 1) Net Realizable Value (NRV), 2) NRV - normal profit (show your detail calculation), and use the LCM rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2020, for the item you select.

**** Item L

Item No. Cost per unit Cost to Replace

Estimated

Selling Price

Cost of Completion

and Disposal

Normal

Profit margin (%)

of selling price

G 4.74 4.51 6.27 1.41 25%
H 4.16 3.69 5.1 1.59 14%
I 6.27 5.33 6.85 1.47 20%
J 5.21 4.63 4.74 1.29 28%
K 3.63 3.34 4.8 1.94 18%
L 4.51 4.16 5.45 1.47 13%
M 3.11 2.87 3.93 1.88 20%
N 6.5 7.08 8.02 1.59 17%

Solutions

Expert Solution

Item Qty Cost per Unit Cost to replace Estimated Selling Price Cost of Completion and Disposal Normal Profit NRV NRV - Normal Profit Market Lower of Cost or Market Value of Inventry at lower of cost or market value
G                       1 4.74 4.51 6.27 1.41 1.5675 4.86 3.2925 4.51 4.51 4.51
H                       1 4.16 3.69 5.1 1.59 0.714 3.51 2.796 3.51 3.51 3.51
I                       1 6.27 5.33 6.85 1.47 1.37 5.38 4.01 5.33 5.33 5.33
J                       1 5.21 4.63 4.74 1.29 1.3272 3.45 2.1228 3.45 3.45 3.45
K                       1 3.63 3.34 4.8 1.94 0.864 2.86 1.996 2.86 2.86 2.86
L                       1 4.51 4.16 5.45 1.47 0.7085 3.98 3.2715 3.98 3.98 3.98
M                       1 3.11 2.87 3.93 1.88 0.786 2.05 1.264 2.05 2.05 2.05
N                       1 6.5 7.08 8.02 1.59 1.3634 6.43 5.0666 6.43 6.43 6.43
Total ending inventory value 32.12

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