Question

5) A company sells three products whose prices are sensitive to changes in value. The following inventory valuation is available for these products at March 31. Product Units Unit Cost Net Realizable Value 20 $8 $6 40 60 $10 a) Calculate the inventory at the lower of cost and net realizable value (4 marks) b) do the journal entry to adjust the inventory on the balance sheet (4 marks)

Answer 1

(6) a) n Product (2) Unit (3) Unit cost (4)_ Net Realizabr value _(s) Lower of (s) and(y) value of Inventry 22 x (5) $140 $240 $10 $8 40 $ 480 $320 $ 1180 I cost of Inventory (2) x (3) $160 $ 240 O andel and valu of Inventory = $1180 B $360 $ 1360 Difterenu = 1360 1180 = $180 . Jouma Entry - Debit Credit - Cost of goods sold & 180 To Inventory Ac $180 (To adjust inventory at lown of cost or NRV) OR Debit Credit Inventory written-down loss Al $180 To Inventore Ale $180 (To adjust inventory at lower of cost or NRV) .