Question

In: Accounting

Home furnishings reports inventory using the lower of cost and net realizable value (NRV).

Home furnishings reports inventory using the lower of cost and net realizable value (NRV). Below is information related to its year-end inventory.

 

 Required:

1. Calculate the total recorded cost of ending inventory before any adjustments. 

2. Calculate ending inventory using the lower of cost and net realizable value. 

3. Record any necessary adjustment to inventory. 

4. Explain the impact of the adjustment in the financial statements. 

Solutions

Expert Solution

1.

Inventory Quantity Unit Cost Furniture 200 Electronics 50 Total recorded cost of ending inventory before any adjustments $ 85

2.

Total Cost Lower of cost and net Inventory Quantity realizable value Furniture 200 $ 85 Electronics 501 $ 300 Total ending in

3.

Date Credit General Journal Cost of goods sold Inventory (37,000-32,000) Debit 5,000 5,000

4.

Increase in cost of goods sold decreases the net income on the income statement by $5,000, and decreases the retained earning


Related Solutions

A company reports inventory using the lower of cost and net realizable value. See the following...
A company reports inventory using the lower of cost and net realizable value. See the following information related to its year-end inventory:    Inventory Quantity Cost NRV Item A 150 $ 29 $ 34 Item B 50 34 24    a. Calculate ending inventory for the company under the lower of cost and net realizable value. b. Record the necessary adjusting entry to inventory.
Determining Lower of Cost or Net Realizable Value (NRV) Crane Company had the following inventory at...
Determining Lower of Cost or Net Realizable Value (NRV) Crane Company had the following inventory at December 31, 2017. Unit Price Quantity Cost NRV Desks Model 9001 70 $190 $210 Model 9002 45 280 268 Model 9003 20 350 360 Cabinets Model 7001 120 60 64 Model 7002 80 95 88 Model 7003 50 130 126 a. Determine the ending inventory amount by applying the net realizable value rule to: 1. Each item of inventory. $Answer 2. Each major category...
Determining Lower of Cost or Net Realizable Value (NRV) Crane Company had the following inventory at...
Determining Lower of Cost or Net Realizable Value (NRV) Crane Company had the following inventory at December 31, 2017. Unit Price Quantity Cost NRV Desks Model 9001 70 $190 $210 Model 9002 45 280 268 Model 9003 20 350 360 Cabinets Model 7001 120 60 64 Model 7002 80 95 88 Model 7003 50 130 126 a. Determine the ending inventory amount by applying the net realizable value rule to: 1. Each item of inventory. $Answer 2. Each major category...
Determining Lower of Cost or Net Realizable Value (NRV) Crane Company had the following inventory at...
Determining Lower of Cost or Net Realizable Value (NRV) Crane Company had the following inventory at December 31, 2017. Unit Price Quantity Cost NRV Desks Model 9001 74 $190 $210 Model 9002 49 280 268 Model 9003 24 350 360 Cabinets Model 7001 124 60 64 Model 7002 84 95 88 Model 7003 54 130 126 a. Determine the ending inventory amount by applying the net realizable value rule to: 1. Each item of inventory. $Answer 2. Each major category...
A company reports inventory using the lower-of-cost and net realizable value. Below is information related to...
A company reports inventory using the lower-of-cost and net realizable value. Below is information related to its year-end inventory: Inventory Quantity Cost NRV Unit A 10            $30          $32          Unit B 18            43          40          Unit C 12            23          27          Unit D 15            18          17              a. Calculate ending inventory under the lower-of-cost and net realizable value. b. Prepare the necessary adjusting entry to inventory. (If no entry is required for a transaction/event, select...
Explain how net realizable value (NRV) is calculated and how the lower of cost of net...
Explain how net realizable value (NRV) is calculated and how the lower of cost of net realizable value rule (LCNRV) is applied to valuing inventory. a) Definition of net realizable value b) Alternative methods for applying the rule c) Describe the two alternative methods for recording adjustments under the LCNRV method d) Assume that a firm has an ending inventory valued at cost of $100,000 and at NRV at $85,000, record the journal entries for each of the two recording...
Problem 6-4A Report inventory using lower of cost and net realizable value (LO6-6) Skip to question...
Problem 6-4A Report inventory using lower of cost and net realizable value (LO6-6) Skip to question [The following information applies to the questions displayed below.] A local Chevrolet dealership carries the following types of vehicles: Unit Unit Inventory Items Quantity Cost NRV Vans 3 $ 21,000 $ 19,000 Trucks 6 16,800 15,800 2-door sedans 2 11,800 13,800 4-door sedans 7 15,800 18,800 Sports cars 3 31,000 34,000 SUVs 5 27,600 22,000 Because of recent increases in gasoline prices, the car...
Janis Company correctly applies the Lower of Cost or Net Realizable Value procedure to its inventory...
Janis Company correctly applies the Lower of Cost or Net Realizable Value procedure to its inventory on a per-unit basis. Information for Janis' seven products at the end of 2020 is as follows: Product Quantity Cost per unit Selling Price Cost to complete for sale A 900 5.10 7.25 1.90 B 1200 4.30 5.40 1.20 C 800 7.20 8.00 0.70 D 1000 5.75 6.20 0.55 E 700 3.60 5.20 0.80 F 800 4.80 6.25 1.10 G 900 2.90 4.00 1.45...
Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower...
Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory. please answer in your own words, do not use the outside resources
Explains the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower...
Explains the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT