1 answer

Cost Net realizable value Net realizable value less normal profit Market replacement cost 1 $7.60 9.05 8.50 7.70 2 $11....

Question:

Cost Net realizable value Net realizable value less normal profit Market replacement cost 1 $7.60 9.05 8.50 7.70 2 $11.30 9.8

Cost Net realizable value Net realizable value less normal profit Market replacement cost 1 $7.60 9.05 8.50 7.70 2 $11.30 9.80 8.75 9.90 3 $11.65 12.40 11.00 12.70 4 $6.05 5.10 3.25 4.85 5 $7.60 6.90 5.80 4.50 Determine the proper unit inventory price in the above independent cases by applying the lower of cost or market rule. Case 1 $ Case 2 Case 3 Case 4 Case 5

Answers

Solution

Case 1 $       7.60
Case 2 $       9.80
Case 3 $    11.65
Case 4 $       4.85
Case 5 $       5.80

Working

Cost Replacement cost NRV NRV-NP Market Per unit Inventory Value
Case 1 $       7.60 $       7.70 $       9.05 $       8.50 $       8.50 $       7.60
Case 2 $    11.30 $       9.90 $       9.80 $       8.75 $       9.80 $       9.80
Case 3 $    11.65 $    12.70 $    12.40 $    11.00 $    12.40 $    11.65
Case 4 $       6.05 $       4.85 $       5.10 $       3.25 $       4.85 $       4.85
Case 5 $       7.60 $       4.50 $       6.90 $       5.80 $       5.80 $       5.80

If we want to value inventory on the basis of lower of cost or market value then we have to first calculate market value.

To calculate market value an easy method is used in this question. We will take the middle value of the given below values to ascertain market value.

Replacement value NRV NRV minus Normal Profits
.

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