Question

Moss Co. has determined its year-end inventory on a FIFO basis to be $400,000. Information pertaining to that inventory is as follows: Estimated selling price $ 408,000 Estimated costs to sell 20,000 What should be the book value of Moss's inventory?

Answer 1

Inventory should be valued at lower of Cost or NRV (Net Realisable Value). Net realisable value Estimated selling price Less: Estimated costs to sell Net realisable value $ $ $ 408,000 20,000 388,000 Hence, book value of inventory should be $ 388,000 (i.e. lower of Cost $ 400,000 or NRV $ 388,000)