The entity is considering the valuation of its harvested coffee beans. Industry practice is to value the coffee beans at market value and uses it as a reference to a local publication.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter7: Inventories: Cost Measurement And Flow Assumptions
Section: Chapter Questions
Problem 3MC: During 2019, R Corp., a manufacturer of chocolate candies, contracted to purchase 100,000 pounds of...
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Althea Nicole Company is a producer of coffee. The entity is considering the valuation of
its harvested coffee beans. Industry practice is to value the coffee beans at market value and uses it
as a reference to a local publication.
On December 31, 2020, the entity has harvested coffee beans costing P1,500,000 and with a fair value
less cost to sell of P1,900,000 at the point of harvest. Because of the long aging and maturation process
after harvest, the harvested coffee beans were still on hand on December 31, 2021. On that date, the
fair value less cost to sell is P2,000,000, and the net realizable value is P1,850,000.
Requirements:
1. How much is the cost of the inventory of coffee beans?
2. What is the LCNRV of the inventory of coffee beans on Dec. 31, 2021?
3. Prepare the journal entry to record the adjustment of inventory on December 31, 2021?

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