LCM (Lower of Cost or Market) approach: It is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory. NRV (Net Realizable Value) : It refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory. The value is reduced by the expected cost of completion, disposal and transportation. Sales commission and shipping costs also included in the predictable cost. To Explain: whether LCM approach used by Company A to value its inventory differ from GAAP (Generally Accepted Accounting Principles).

Question

Want to see the full answer?

Answer 1

Question

Chapter 9, Problem 2CCTC

To determine

LCM (Lower of Cost or Market) approach: It is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

NRV (Net Realizable Value): It refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory. The value is reduced by the expected cost of completion, disposal and transportation. Sales commission and shipping costs also included in the predictable cost.

To Explain: whether LCM approach used by Company A to value its inventory differ from GAAP (Generally Accepted Accounting Principles).

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Pls answer number 15 with solutions An entity is the defendant in a patent infringement lawsuit. The entity’s lawyers believe there is a 30% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be required to pay damages of ₱800,000 (the amount sought by the claimant) and an 80% chance that the entity will be required to pay damages of ₱400,000 (the amount that was recently awarded by the same judge in a similar case). Other outcomes are unlikely. The court is expected to rule in late December 20x2. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10% per year. How much is the provision for lawsuit at…

AP7.10 (LO 6) As discussed in the chapter, the results of tests of controls should ultimately influence the auditor’s audit strategy.RequiredExplain the differences between an audit of internal controls as required by AS 2201 and the testing of internal controls for the purposes of expressing an opinion on the financial statements as mandated by AU-C 315. Refer to the standards in your answer.

Year 5 222826.84 8% fee=17826.15= 240652.99 20%annual return(240652.99*20%). =48130.59 Rs.288,783.58 For the above part, is the answer correct. should it not be 222,826.84 - 17,826.15 which results to 205,000.69