In: Accounting
The December 31, 2016 inventory of ABC Company consisted of four products, for which certain information is provided below.
Estimated Expected Estimated
Product Original Cost Completion Cost Selling Price Cost to sell
A $25 $6 $40 $4
B $42 $12 $58 $8
C $120 $25 $150 $15
D $18 $3 $26 $2
Using the lower-of-cost-or-net realizable value approach applied on an individual-item basis, compute the inventory valuation that should be reported for each product on December 31, 2016.
Estimated
Product Original Cost Completion Cost Total cost Net selling price(Selling price-cost to sell)
A $25 $6 $31 =(40-4)=$36
B $42 $12 $54 =(58-8)=$50
C $120 $25 $145 =(150-15)=$135
D $18 $3 $21 =(26-2) =$24
So, inventory will be valued at lower of cost and net realisable value
Product Toal Cost Net Realisable value Inventory to be valued
A $31 $36 $31
B $54 $50 $50
C $145 $135 $135
D $21 $24 $21