What is the effect on reported net income of applying the lower-of-cost-or-market method to ending inventory?
Lower of cost or market method refers to the method where the closing inventory is valued at cost or net realizable value (sales value less cost of sales ) which ever is lower. This is done as the financial statements are prepared based on prudence, which means future losses should be accounted for and future profits should be ignored and here in inventory valuation we value the inventoy at the lowest of net realizable value or cost in case the net realizable value is less than cost, then recording the ending inventory at cost will lead to overstating the net income.
EFFECT ON REPORTED NET INCOME
The reported net income is effected by the lower-of-cost-or-market method, as when the cost will be higher then NRV, we will take NRV under consideration for valuing the inventory and if cost is less than NRV, we will take cost for valuing the inventory. And ending inventory inventory comes to the credit side of statement of profit and loss thus, effecting the net income directly.
Higher the value of ending inventory, higher the net income and vice-a-versa.
What is the effect on reported net income of applying the lower-of-cost-or-market method to ending inventory?
I need help figuring out how to find the ending inventory using the lower-of-cost-or-market method: Lower-of-Cost-or-Net Realizable Value Method The following data are taken from the Simpson Corporation's inventory accounts: Net Item Unit Realizable Code Quantity Cost Value Product 1 ZKE 150 $72 ZKF 350 83 Product 2 MNJ 450 72 MNS 250 83 87 Calculate the value of the company's ending inventory using the lower-of-cost-or-market method applied to each item of inventory. Applying the lower-of-cost-or-market method to each item...
How does the retail inventory method establish the lower-of-cost-or-market valuation for ending inventory? 1. The procedure is applied on a cost basis at the unit level. 2. By excluding net markups from the cost-to-retail ratio. 3. By excluding beginning inventory from the cost-to-retail ratio. 4. By excluding net markdowns from the cost-to-retail ratio. The original cost of an inventory item is above the replacement cost and below the net realizable value. The net realizable value less the normal profit margin...
Lower-of-Cost-or-Net Realizable Value Method The following data are taken from the Simpson Corporation's inventory accounts: Net Item Unit Realizable Code Quantity Cost Value Product 1 ZKE 100 552 $50 ZKF 300 63 Product 2 MNJ 400 52 MNS 2006 Calculate the value of the company's ending inventory using the lower-of-cost-or-market method applied to each item of inventory. Applying the lower-of-cost-or-market method to each item of the inventory results in an ending inventory amount of S Previous Save Answers
The controller of Greene Yard Company is applying the lower-of-cost-or-net realizable basis of valuing its ending inventory. The following information is available Market Value Cost Lawnmowers: Self-propelled $16,800 $17,000 Push type Total 19,500 36,300 18,000 35,000 Snowblowers: Manual Self-start Total 30,000 21,000 51,000 $85,800 $86,000 29,800 19,700 49,500 Total inventory Compute the value of the ending inventory by applying the lower-of-cost-or-net realizable basis Total ending inventory
Lower-of-cost-or-market-method Lower-of-Cost-or-Market Method On the basis of the data shown below: Cost per Unit Market Value per Unit (Net Realizable Value) Item A13Y VZ31 Inventory Quantity 120 245 $59 $55 Determine the value of the inventory at the lower of cost or market by applying lower of cost or market to each inventory item, as shown in Exhibit 9.
When net realizable value is lower than cost, and the loss method applying the lower-of-cost-and-net-realizable approach of recording the write-down is used, what account is credited? A. Allowance to Reduce Inventory to NRV. B. Inventory. C. Cost of Goods Sold. D. A loss account.
Lower-of-Cost-or-Market Method On the basis of the following data, determine the value of the inventory at the lower-of-cost-or-market by applying lower-of-cost-or-market to each inventory Item, as shown in Exhibit 10. TtemInventory QuantityCost per UnitMarket Value per Unit(Net Realizable Value)JFW199$23$21SAW92071217
I. Lower-of-Cost-or-Market Rule. Apex Corporation has four products in inventory at year-end: Number of Market Product Units Cost/Unit Price/Unit Ć 10,000 20,000 30,000 40,000 $ 8 $16 $23 ... $10 $15 $20 $10 D..... $ 8 a. Calculate the ending inventory by applying the lower-of-cost-or-market rule (1) item by item and (2) to the inventory as a whole. b. Calculate the effect on the net income of using one version of the lower-of-cost-or- market rule instead of the other.
Lower-of-Cost-or-Net Realizable Value Method The following data are taken from the Daisy Corporation's inventory accounts: Net Unit Realizable Quantity Cost Value Item Code Product 1 ZKE ZKF Product 2 MNJ MNS $18 100 300 $22 31 36 400 250 22 31 19 37 Calculate the value of the company's ending inventory using the lower-of-cost-or-net realizable method applied to each item of inventory. Applying the lower-of-cost-or-net realizable value method to each item of the inventory results in an ending inventory amount...
Lower-of-Cost-or-Market Method On the basis of the data shown below: Inventory Item Quantity 1A17154 Cost per Unit Market Value per Unit (Net Realizable Value) $47 $44 OST4 293 Determine the value of the inventory at the lower of cost or market by applying lower of cost or market to each Inventory item, as shown in Exhibit 9.