AS per LCNRV, the inventory is measured at the lower of cost or Net Realizable Value. This can be done on item to item basis and also on an aggregate basis.
Whenever the NRV is lower than the cost the inventory is written down to the NRV through Profit and loss A/c.
Scrap items are also written down(If realizable value is significantly reduced) or written off (if realizable value is nil). If written down, it is shown at scrap value. If it is written off, it is not shown in the inventory.
PART |
QUANTITY |
COST(A) [$] |
NET REALIZABLE VALUE(B) [$] |
LOWER OF (A) OR (B) |
TOTAL[Quantity * Lower of (A) or (B)] |
A419 |
6400 |
15 |
27 |
15 |
$ 96,000 |
A435 |
5440 |
12 |
9 |
9 |
$ 48,960 |
A545 |
12928 |
10 |
15 |
10 |
$ 1,29,280 |
A615 |
9600 |
14 |
10 |
10 |
$ 96,000 |
A721 |
14080 |
13 |
14 |
13 |
$ 1,83,040 |
A885 |
17920 |
20 |
26 |
20 |
$ 3,58,400 |
A999 |
11776 |
9 |
1 |
1 |
$ 11,776 |
TOTAL INVENTORY |
$ 9,23,456 |
Solution to Part (a)
THUS, Inventory on December, 2020 = $ 9,23,456
Solution to Part (b)
PART |
QUANTITY (A) |
COST [$] (B) |
TOTAL OF COST(A*B) |
NET REALIZABLE VALUE(C) [$] |
TOTAL OF NRV (A*C) |
LOWER OF total of cost or total of NRV |
A419 |
6400 |
15 |
96,000 |
27 |
1,72,800 |
|
A435 |
5440 |
12 |
65,280 |
9 |
48,960 |
|
A545 |
12928 |
10 |
1,29,280 |
15 |
1,93,920 |
|
A615 |
9600 |
14 |
1,34,400 |
10 |
96,000 |
|
A721 |
14080 |
13 |
1,83,040 |
14 |
1,97,120 |
|
A885 |
17920 |
20 |
3,58,400 |
26 |
4,65,920 |
|
A999 |
11776 |
9 |
1,05,984 |
1 |
11,776 |
|
TOTAL |
$ 10,72,384 |
$ 11,86,496 |
$ 10,72,384 |
THUS, Inventory on December, 2020 = $ 10,72,384
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