XY store has two inventories: A and B. The current LCNRV allowance has a balance of $2,000.
For inventory A: the cost of ending inventory is $5,000, NRV is $4,000.
For inventory B: On January 1, XY store had inventory B of $48,000. January inventory B purchases were $46,000 and January B sales were $90,000. On February 1 a fire destroyed most of the inventory B. The rate of gross profit was 25% of cost. Inventory B with a cost of $6,000 remained undamaged after the fire, and the estimated net realizable value of the remaining inventory B is $4,000. What is XY’s inventory loss?
Inventory A: Cost 5000, NRV 4,000
Inventory A valuation is $ 4,000 and loss $1000
Inventory B:
Beginning Inventory on January 1, $ 48,000
Add: Purchases $ 46,000
Total Cost of Goods available for sale $ 94,000
Less: cost of goods sold* $ 72,000
closing inventory $ 22,000
Less: cost of undamaged inventory $ 6,000
inventory damaged on fire $ 16,000
* cost of goods sold = sales - profit margin (25% on cost)
= 96,000-(96,000x20%)
= 96,000-18,000
= 72,000
closing inventory of B at cost $ 6,000 its NRV $ 4.000
hence Inventory B valuation is $ 4000 and loss $2000
XY's Inventory Loss :
Loss on fire = $16,000
LCNRV Loss = Inventory A's Loss $ 1000 + Inventory B Loss $ 2000
= $3,000
XY store has two inventories: A and B. The current LCNRV allowance has a balance of...
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