Question
Norton Corporation uses the Lower-of-Cost-or-Market (LCM) method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2020, consists of products
Norton Corporation uses the Lower-of-Cost-or-Market (LCM) method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2020, consists of products G, H, I, J, K, L, M and N. Relevant per unit data for these products appear below.
Required: Compute 1) Net Realizable Value (NRV), 2) NRV - normal profit (show your detail calculation), and use the LCM rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2020, for the item you select.
**** Item L
| Item No. | Cost per unit | Cost to Replace | Estimated Selling Price | Cost of Completion and Disposal | Normal Profit margin (%) of selling price |
| G | 4.74 | 4.51 | 6.27 | 1.41 | 25% |
| H | 4.16 | 3.69 | 5.1 | 1.59 | 14% |
| I | 6.27 | 5.33 | 6.85 | 1.47 | 20% |
| J | 5.21 | 4.63 | 4.74 | 1.29 | 28% |
| K | 3.63 | 3.34 | 4.8 | 1.94 | 18% |
| L | 4.51 | 4.16 | 5.45 | 1.47 | 13% |
| M | 3.11 | 2.87 | 3.93 | 1.88 | 20% |
| N | 6.5 | 7.08 | 8.02 | 1.59 | 17% |
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
