Determining Lower of Cost or Net Realizable Value (NRV)
Crane Company had the following inventory at December 31, 2017.
Unit Price
QuantityCostNRV
Desks
Model 900174$190$210
Model 900249280268
Model 900324350360
Cabinets
Model 70011246064
Model 7002849588
Model 700354130126
a. Determine the ending inventory amount by applying the net
realizable value rule to:
1. Each item of inventory.
$Answer
2. Each major category of inventory.
$Answer
3. Total inventory.
$Answer
Answer 1 | Each item of inventory | $ 57,228 |
Answer 2 | Each major category of inventory | $ 58,312 |
Answer 3 | Total inventory | $ 58,620 |
Total Cost = Quantity * Cost per unit |
Net realizable value = Quantity * Net realizable Value per unit |
Total Inventory = Lower of (Total Cost or Net realizable Value) |
Amount of loss = Total Cost - Total Inventory |
LCNRV rule applies to individual Products (Each item of inventory) | ||||||
Products | Quantity | Cost per unit | Net realizable value per unit | Total Cost | Net realizable value | Inventory Value |
Desks | ||||||
Model 9001 | 74 | $ 190 | $ 210 | $ 14,060 | $ 15,540 | $ 14,060 |
Model 9002 | 49 | $ 280 | $ 268 | $ 13,720 | $ 13,132 | $ 13,132 |
Model 9003 | 24 | $ 350 | $ 360 | $ 8,400 | $ 8,640 | $ 8,400 |
Cabinets | ||||||
Model 7001 | 124 | $ 60 | $ 64 | $ 7,440 | $ 7,936 | $ 7,440 |
Model 7002 | 84 | $ 95 | $ 88 | $ 7,980 | $ 7,392 | $ 7,392 |
Model 7003 | 54 | $ 130 | $ 126 | $ 7,020 | $ 6,804 | $ 6,804 |
Total | $ 57,228 |
LCNRV rule applies to Products categories (Each major category of inventory) | ||||||
Products | Quantity | Cost per unit | Net realizable value per unit | Total Cost | Net realizable value | Inventory Value |
Desks | ||||||
Model 9001 | 74 | $ 190 | $ 210 | $ 14,060 | $ 15,540 | |
Model 9002 | 49 | $ 280 | $ 268 | $ 13,720 | $ 13,132 | |
Model 9003 | 24 | $ 350 | $ 360 | $ 8,400 | $ 8,640 | |
Subtotal | 36,180 | 37,312 | $ 36,180 | |||
Cabinets | ||||||
Model 7001 | 124 | $ 60 | $ 64 | $ 7,440 | $ 7,936 | |
Model 7002 | 84 | $ 95 | $ 88 | $ 7,980 | $ 7,392 | |
Model 7003 | 54 | $ 130 | $ 126 | $ 7,020 | $ 6,804 | |
Subtotal | 22,440 | 22,132 | $ 22,132 | |||
Total | $ 58,312 |
LCNRV rule applies to total inventory | ||||||
Products | Quantity | Cost per unit | Net realizable value per unit | Total Cost | Net realizable value | Inventory Value |
Desks | ||||||
Model 9001 | 74 | $ 190 | $ 210 | $ 14,060 | $ 15,540 | |
Model 9002 | 49 | $ 280 | $ 268 | $ 13,720 | $ 13,132 | |
Model 9003 | 24 | $ 350 | $ 360 | $ 8,400 | $ 8,640 | |
Cabinets | ||||||
Model 7001 | 124 | $ 60 | $ 64 | $ 7,440 | $ 7,936 | |
Model 7002 | 84 | $ 95 | $ 88 | $ 7,980 | $ 7,392 | |
Model 7003 | 54 | $ 130 | $ 126 | $ 7,020 | $ 6,804 | |
Total | $ 58,620 | $ 59,444 | $ 58,620 |
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