Question

Calculating Lower-ot Cost-or-Net Realizable Value The following information is from Guccii Company's individual inventory items as of December 31, 2020. Inventory Quantity Cost per Unit Net Realizable Value per Unit Classification:Premium Item 1 $180 $185 Item 2 150 100 98 Item 3 165 175 Item 4 Classification: Classic Item 5 80 200 158 Item 6 Item 7 Item 8 500 280 80 Required a. Calculate lower-of-cost-or-net realizable value of Guccii's December 31, 2020, inventory applying the rule to each individual item. $ b. Calculate lower-of-cost-or-net realizable value of Guccii's December 31, 2020, inventory applying the rule by inventory category. $ c. Calculate lower-of-cost-or-net realizable value of Guccii's December 31, 2020, inventory applying the rule to total inventory. $1

Answer 1

Answer a

$ 166,700

Calculations:

Classification Premium	Quantity	Cost	NRV	Lower of Cost or NRV	Value
Item 1	80	$ 180	$ 185	$ 180	$   14,400
Item 2	150	$ 100	$   98	$   98	$   14,700
Item 3	200	$ 165	$ 175	$ 165	$   33,000
Item 4	140	$ 158	$ 120	$ 120	$   16,800
Classification Classic
Item 5	100	$ 100	$   98	$   98	$     9,800
Item 6	50	$   90	$   95	$   90	$     4,500
Item 7	500	$ 105	$ 115	$ 105	$   52,500
Item 8	280	$   80	$   75	$   75	$   21,000
Total					$ 166,700

Answer b

$ 171,700

Calculations:

Classification Premium	Quantity	Cost	NRV	Total Cost	Total NRV
Item 1	80	$ 180	$ 185	$   14,400	$   14,800
Item 2	150	$ 100	$   98	$   15,000	$   14,700
Item 3	200	$ 165	$ 175	$   33,000	$   35,000
Item 4	140	$ 158	$ 120	$   22,120	$   16,800
Total				$   84,520	$   81,300
Classification Classic
Item 5	100	$ 100	$   98	$   10,000	$     9,800
Item 6	50	$   90	$   95	$     4,500	$     4,750
Item 7	500	$ 105	$ 115	$   52,500	$   57,500
Item 8	280	$   80	$   75	$   22,400	$   21,000
Total				$   89,400	$   93,050
Inventory = 81300+89400 = $ 171,700

Answer c

$ 173,920

Calculations:

Classification Premium	Quantity	Cost	NRV	Total Cost	Total NRV
Item 1	80	$ 180	$ 185	$   14,400	$   14,800
Item 2	150	$ 100	$   98	$   15,000	$   14,700
Item 3	200	$ 165	$ 175	$   33,000	$   35,000
Item 4	140	$ 158	$ 120	$   22,120	$   16,800
Classification Classic
Item 5	100	$ 100	$   98	$   10,000	$     9,800
Item 6	50	$   90	$   95	$     4,500	$     4,750
Item 7	500	$ 105	$ 115	$   52,500	$   57,500
Item 8	280	$   80	$   75	$   22,400	$   21,000
				$ 173,920	$ 174,350

In case of any doubt, please comment.