In: Accounting
LCNRV and LCM
a. As of 12-31-18, Zena Company has four different inventory items on hand. Data on the four items follows:
Item |
Quantity on hand |
Unit cost |
Expected selling price |
Estimated disposal costs |
C3Z22P3 |
400 |
$30 |
$80 |
$7 |
PQ27845 |
100 |
$52 |
$55 |
$5 |
ZT15577 |
250 |
$27 |
$40 |
$0 |
SF98888 |
300 |
$13 |
$30 |
$9 |
Using the lower-of-cost-or-net realizable value approach applied on an individual-item basis, determine if Zena needs to make an entry to write her inventory down. If so, prepare the entry Zena should make.
b. As of 12-31-18, Bartle Company has four different inventory items on hand. Data on the four items follows:
Item |
Quantity on hand |
Unit cost |
Expected selling price |
Replacement Cost |
Normal gross profit % * |
Estimated disposal costs |
C3Z22P3 |
550 |
$30 |
$40 |
$25 |
40 |
$2 |
PQ27845 |
175 |
$10 |
$20 |
$12 |
30 |
$1 |
ZT15577 |
250 |
$17 |
$30 |
$20 |
60 |
$0 |
SF98888 |
100 |
$43 |
$50 |
$44 |
50 |
$8 |
* the % is a % of the expected selling price
Assume Bartle uses a LIFO costing method. Using the lower-of-cost-or-market value approach applied on an individual-item basis, determine if Bartle needs to make an entry to write her inventory down. If so, prepare the entry Bartle should make.