Question

Use the following to answer the question 11 below: Novelli's Nursery has developed the following data in order to calculate the lower of cost or net realizable value for its products. The individual products are listed within the categories of trees. Selling Price Cost $ 1,800 2,200 $ 1,700 1,600 Broad leaf trees: Ash Beech Needle leaf trees: Cedar Fir Fruit trees: Apple Cherry $2,500 3,600 $1,750 3,350 $ 1,800 2,300 $1,400 1,800 The costs to sell are 10% of selling price. Page 4 of 9

Answer 1

inventory should be value at [selling price - selling cost] or cost whichever lower

1.

	sales	selling cost	net realizable value	cost	inventory [lower of NRV or cost]
ash	1800	180[1800*10%]	1620[1800-180]	1700	1620
beech	2200	220[2200*10%]	1980	1600	1600
needle leaf
cedar	2500	250	2250	1750	1750
fir	3600	360	3240	3350	3240
fruit trees
apple	1800	180	1620	1400	1400
cherry	2300	230	2070	1800	1800
			Total		11410$[1620+1600+1750+1400+3240+1800]

2.group of trees

	sales	selling cost	net realizable value	cost	inventory [lower of NRV or cost]
ash	1800	180[1800*10%]	1620[1800-180]	1700	1620
beech	2200	220[2200*10%]	1980	1600	1600
group of broad leaf trees	4000[1800+2200]	400	3600	3300	3300
needle leaf
cedar	2500	250	2250	1750	1750
fir	3600	360	3240	3350	3240
group of needle leaf	6100	610	5490	5100	5100
fruit trees
apple	1800	180	1620	1400	1400
cherry	2300	230	2070	1800	1800
Group of fruit trees	4100	410	3690	3200	3200
			Total		11600$[3300+5100+3200]