Taipai Ltd. follows the practice of valuing its inventory at the LCNRV. The following information is available from the company’s inventory records as of December 31, 2022 (amounts in thousands).

Instructions

Jay Shin is an accounting clerk in the accounting department of Taipai Co., and he cannot understand how completion and selling costs affect the determination of net realizable value. Jay is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.

a. Calculate the LCNRV using the “individual-item” approach.

b. Show the journal entry he will need to make in order to write down the ending inventory from cost to NRV.

c. Then, write a memo to Jay explaining what net realizable value is, as well as how it is computed. Use your calculations to aid in your explanation.

Transcribed Image Text:

Item Quantity Unit Cost Estimated Selling Price/Unit Completion & Selling Cost/Unit A 1,100 NT$7.5o NT$10.50 NT$1.50 B 800 8.20 9.40 1.30 1,000 5.60 7.20 1.75 1,000 3.80 6.30 1.80 E 1,400 6.40 6.70 0.70