Question
Problem 4: Lower of cost and net realizable value (NRV) The accountant of Sun Shine Ltd. compiled the following information about its inventories on December
Problem 4: Lower of cost and net realizable value (NRV)
The accountant of Sun Shine Ltd. compiled the following information about its inventories on December 31, 2015. The selling cost is 12% of selling price.
|
| Cost | Selling Price | NRV | Inventory Value |
| Beauty Products A | $160,000 | $200,000 |
|
|
| Beauty Products B | $160,000 | $180,500 |
|
|
| Personal Care Products A | $168,000 | $189,000 |
|
|
| Personal Care Products b | $135,000 | $165,000 |
|
|
| Baby, Kids, and Toys | $114,000 | $125,000 |
|
|
Required:
Determine the amount of inventory to be reported on the 12/31/2015 balance sheet when the lower of cost of NRV rule is applied
by individual line of products,
by major category of products (I.e., beauty products, personal care products, and baby/kids products),
by entire inventory.
Prepare the adjusting entry when the rule is applied by individual line of products.
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External Auditing Tutorial
Authors: Jo Osborne, John Taylor
1st Edition
9781909173965, 1909173967
