CONNECT ONLINE ACCESS FOR INTERMEDIATE
10th Edition
ISBN: 9781264798834
Author: SPICELAND
Publisher: MCG
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Textbook Question
Chapter 9, Problem 9.2E
Lower of cost or net realizable value
• LO9–1
The inventory of Royal Decking consisted of five products. Information about the December 31, 2018, inventory is as follows:
| Per Unit | ||
| Product Cost | Selling Price | |
| A | $ 40 | $ 60 |
| B | 80 | 100 |
| C | 40 | 80 |
| D | 100 | 130 |
| E | 20 | 30 |
Costs to sell consist of a sales commission equal to 10% of selling price and shipping costs equal to 5% of cost.
Required:
What unit value should Royal Decking use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to units of ending inventory?
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QUESTION 1
a. Kpogo Ltd has the following products in inventory at the end of 2019:
Units
Cost per unit GH¢
XYZ (completed)
540
22
ABC (part complete)
280
26
Each product normally sells at GH¢34 per unit. Due to the difficult trading conditions, Kpogo Ltd
intends to offer a discount of 15% per unit and expects to incur GH¢4 per unit in selling costs.
GH¢10 per unit is expected to be incurred to complete each unit of ABC.
Required:
In accordance with IAS 2 Inventories, at what amount should inventory be stated in the financial
statements of Kpogo Ltd as at 31 December 2019?
b. According to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors,
an entity must select and apply its accounting policies consistently from one period to the
next and among various items in the financial statements. However, an entity may change
its accounting policies under certain conditions.
Required:
Identify the circumstances under which it may be appropriate to change accounting policy
in…
Enabled: Midterm 2 i
C
Cost
The following information pertains to one item of inventory of the Simon Company.
Saved
Per unit
$ 200
170
190
10
30
Replacement cost
Selling price
Disposal costs
Normal profit margin
Using the lower of cost or market method, this item should be valued at:
Knowledge Check 01
A company has gathered the following per unit cost and replacement cost information relating to Its inventory:
- Item A: 5 units with a cost of $50 and a net realizable value of $45
Item B: 7 units with a cost of $60 and a net realizable value of $65
Item C: 9 units with a cost of $30 and a net reallizable value of $25
Under the lower of cost or net realizable value method, what is the amount of ending inventory that should be reported on the
company's balance sheet?
Ending inventory
45
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Chapter 9 Solutions
CONNECT ONLINE ACCESS FOR INTERMEDIATE
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.11ECh. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.1PCh. 9 - Prob. 9.3PCh. 9 - Prob. 9.8PCh. 9 - Prob. 9.1DMPCh. 9 - Prob. 9.3DMPCh. 9 - Prob. 9.4DMPCh. 9 - Prob. 9.5DMPCh. 9 - Prob. 9.6DMPCh. 9 - Prob. 9.7DMPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9DMPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Prob. 9.12DMPCh. 9 - Prob. 2CCTC
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