Concept explainers
1.
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 Calculate: The carrying value of inventory at year-end by using the rule of LCM and NRV applied to (a) individual products, (b) product categories, and (c) total inventory.
2.
The amount of the loss for (a) individual products, (b) product categories, and (c) total inventory.
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INTERMEDIATE ACCTING CONNECT ACCESS >I<
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