Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of...

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Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule f

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Answer 1

Answer #1

S.N	Particulars	Product A $	Product B $
a	Historical Carrying Value	$80	$96
b	Replacement cost	$70	$98
c	Estimated cost of disposal	$32	$30
d	Estimated selling price	$150	$120
e	Net realizable value	$118	$90
f	Normal profit margin	($150 * 30%) =$45	($120 * 30%) =$36
g	Net realizable value - Normal profit margin	$73	$54

In product A, the replacement cost is $70 which is lower than $73 (net realizable value - normal profit). Therefore, the market value will be $73 which is lower than $80 (Cost of the Product A).

So the correct inventory value for product A is $73

In Product B, $96 is the cost which is lower than $98, the eligible replacement cost.

Therefore, the correct inventory value for Product B is $96

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Answer 2

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