1)
LCNRV (Lower of Cost or Net Realizable Value) approach: It is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value 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.
First-in-First-Out (FIFO): In First-in-First-Out method, the cost of initial purchased items is sold first. The value of the ending inventory consists the recent purchased items.
To Prepare: The Company Y’s schedule of cost of goods sold, with a supporting schedule of ending inventory.
2.
To Explain: The rule of lower of cost or net realizable value and its application.
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LooseLeaf Intermediate Accounting w/ Annual Report; Connect Access Card
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