Question

Simmons Company has the following information about its ending inventory. It values its inventory on an individual-item basis. Determine the value of the ending inventory. Show your work.

Item	Quantity	Cost	Estimated Selling Price	Cost to Complete and Sell
A	700	$2.25	$3.25	$1.40
B	500	3.00	3.90	0.80
C	3,000	1.80	2.50	1.20
D	1,000	4.70	6.00	1.50

Answer 1

Solution:

Ending Inventories are valued at cost or realizable value whichever is lower.

Here, Cost is the cost at which inventories are purchased originally.

Net Realizable Value = Estimated Selling Price – Cost to complete and sell the product

Item	Quantity	Cost per unit	Net Realizable Value per unit (Selling Price - Cost to complete and sell)	Lower of Cost or Net Realizable Value	Value of Ending Inventory
	(X)			(P)	(X*P)
A	700	$2.25	$1.85	$1.85	$1,295
B	500	$3.00	$3.10	$3.00	$1,500
C	3000	$1.80	$1.30	$1.30	$3,900
D	1000	$4.70	$4.50	$4.50	$4,500
					$11,195

Value of Ending Inventory = $11,195

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you