Toulouse PLC produces three different products. The following table shows the inventory/stock valuation for each of the products under different bases: FIFOLIFONRV £££I101112II131514III957 323133    In accordance with the “lower-of-cost-or-value” method, Toulouse PLC’s inventory/stock should be stated at: a.Answers:a. £28 b. £30 c. £31 d. £32

Question
Asked Oct 29, 2019

Toulouse PLC produces three different products. The following table shows the inventory/stock valuation for each of the products under different bases:

 

FIFO

LIFO

NRV

 

£

£

£

I

10

11

12

II

13

15

14

III

9

5

7

 

32

31

33

       

In accordance with the “lower-of-cost-or-value” method, Toulouse PLC’s inventory/stock should be stated at:

  a.
Answers:
a. 

£28

 
b. 

£30

 
c. 

£31

 
d. 

£32

check_circleExpert Solution
Step 1

Lower of Cost or Value method is used by companies to determine the value at which inventory shall appear in the balance sheet of the company. This amount is computed as Lower of - Original cost of the asset or the current market price of the asset.

Asset Value Lower of (Original Cost or Current Market Price)
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Asset Value Lower of (Original Cost or Current Market Price)

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Step 2

The cost of the asset changes according to the inventory valuation method used by the company. Each inventory valuation method like FIFO, LIFO, Weighted average cost has different cost values.

In case the company uses the FIFO method for Inventory valuation:

In case the company uses the FIFO method for Inventory valuation:
Cost of the Inventory 32
NRV of the Inventory 33
Therefore, Toulouse PLC's Inventory should be stated at lower of Cost or NRV
=€32
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In case the company uses the FIFO method for Inventory valuation: Cost of the Inventory 32 NRV of the Inventory 33 Therefore, Toulouse PLC's Inventory should be stated at lower of Cost or NRV =€32

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Step 3

In case the company uses the LIFO me...

In case the company uses the LIFO method for Inventory Valuation:
Cost of the Inventory 31
NRV of the Inventory 33
Therefore, Toulouse PLC's Inventory should be stated at lower of Cost or NRV
=€31
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In case the company uses the LIFO method for Inventory Valuation: Cost of the Inventory 31 NRV of the Inventory 33 Therefore, Toulouse PLC's Inventory should be stated at lower of Cost or NRV =€31

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