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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 |
ekkarill92 answered 2 years agoRelated Solutions
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