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.:

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		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.