Question

Herman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Product 3 Cost Selling price Costs to sell Product 536 58 9 Product 2 $106 168 7 2 118 26 Required: What unit values should Herman use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory? Product Cost NRV Per Unit Inventory Value

Answer 1

Determine the values as follows: A 1 Product B Cost $36.00 $106.00 $ 66.00 C NRV Per Unit Inventory Value $79.00 $ 36.00 $96.00 $ 96.00 $92.00 $ 66.00 3 4 2 3 Calculations: A B C D 1 Product Cost NRV Per Unit Inventory Value 2 1 36 =88-9 =MIN(B2,C2) 3 2 106 =168-72 =MIN(B3,C3) 4 3 66 =118-26 =MIN(B4,C4) 106

Calculate the requirements as follows: $ $ Retail 1,35,000 2,32.000 5,000 -10.000 2,27,000 3,62,000 -2,00,000 1,62,000 $ $ Cost 2 Beginning Inventory $ 72,900 3 Add: Net purchases $ 1,02,150 4 Net markups 5 Less: Net markdowns 6 Goods available for sale - Excluding beginning inventory $ 1,02,150 7 Goods availale for sale - Including beginning inventory $ 1,75,050 8 Less: Net Sales 9 Estiamted ending inventory at current year retail prices 10 11 Base year cost-to-retail percentage 54% 12 Current year cost-to-retail percentage 45% 13 Retail price Index, 12/31/2021 14 Ending inventory at Ending inventory at year end retail prices base year retail prices 16 $ 1,62,000 $ 1,62,000 17 18 Ending inventory at dollar-value LIFO retail cost Inventory layer at base Inventory layers year retail prices converted to cost $ 1,35,000 $ 72.900 $ 27,000 $ 12,150 $ 85,050 19 $ $ 1,75,050 85,050 90,000 20 Goods available for sale including beginning inventory 21 Less: Estimated ending inventory at cost 22 Estimated cost of goods sold 23 24 Final Value: 25 Ending inventory at retail 26 Ending inventory at cost 27 Cost of goods sold 1,62,000 85,050 90,000

Calculations: A B Cost 72900 102150 Retail 135000 232000 5000 -10000 =SUM(C3 C5) =C6+C2 -200000 =C7+C8 Wory 2 Beginning Inventory 3 Add: Net purchases 4 Net markups 5 Less: Net markdowns 6 Goods available for sale - Excluding beginning inventory 7 Goods availale for sale - Including beginning inventory 8 Less: Net Sales 9 Estiamted ending inventory at current year retail prices 10 11 Base year cost-to-retail percentage 12 Current year cost-to-retail percentage 13 Retail price Index, 12/31/2021 =SUM(B3:B5) =B6+B2 =B2/C2 =B6/C6 14 Ending inventory at year end retail prices Ending inventory at base year retail prices Inventory layer at base year retail prices =C2 =B16-C16 Inventory layers converted to cost 16 =C9 =A16/B13 17 =C16*1*B11 =C17*B13*B12 =D16+D17 18 Ending inventory at dollar-value LIFO retail cost 19 20 Goods available for sale including beginning inventory =B7 21 Less: Estimated ending inventory at cost =D18 22 Estimated cost of goods sold =B20-B21 23 24 Final Value: 25 Ending inventory at retail =C9 26 Ending inventory at cost =D18 27 Cost of goods sold =B22

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