Question
A8-11 Lower of Cost or NRVTwo Ways to Apply: The information shown below relating to the ending inventory was taken at lower of cost or
A8-11 Lower of Cost or NRVTwo Ways to Apply:
The information shown below relating to the ending inventory was taken at lower of cost or NRV from the records of Electronics Corp.:
Page 495
Per Unit | |||
Inventory Classification | Quantity | Cost | NRV |
Keyboards | |||
Stock A | 12 | $94 | $80 |
Stock B | 20 | 76 | 70 |
Stock C | 18 | 100 | 110 |
Hard drives | |||
Stock X | 30 | 180 | 170 |
Stock Y | 60 | 160 | 180 |
CD burners | |||
Stock D | 60 | 76 | 66 |
Stock E | 200 | 100 | 116 |
Required:
1. Determine the valuation of the above inventory at cost and at lower of cost or NRV, assuming application of lower-of-cost-or-NRV valuation by (a) individual items, and (b) classifications.
2. Give the entry to record the writedown, if any, to reduce ending inventory to lower of cost or NRV. Use the allowance method.
3. Of the two applications described in requirement 2 above, which one appears preferable in this situation? Explain.
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