Question

Novel's Nursery has developed the following data in order to calculate the lower of cost or net realizable value for its products. The Individual products are listed within the categories of trees. Selling Price Cost $1,980 2,470 $1,880 1,780 Broad leaf trees: Ash Beech Needle leaf trees: Cedar Fir Fruit trees: Apple Cherry $2,860 4,85e $1,980 2,570 $1,930 3,530 $1,580 1,980 The costs to sell are 10% of selling price. Required: Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to the total inventory. Product Cost NRV Lower of Cost or NRV Ash Beech Cedar For Apple Cherry Total Inventory Inventory value $ 1,880 1.780 1.930 3,530 1,580 1.980 $ 12.60 $ 1,692

Answer 1

Working Note: Calculation of Net Realizable Value (NRV): Net Realizable Value = Selling Price - Cost to Sell Product Ash Beech Cedar Fir Apple Cherry $ $ $ $ $ $ Selling Price 1,980.00 $ 2,470.00 $ 2,860.00 $ 4,050.00 $ 1,980.00 $ 2,570.00 $ Cost to Sell (10% of Selling Price (198.00) $ (247.00) $ (286.00) $ (405.00) $ (198.00) $ (257.00) $ NRV 1,782.00 2,223.00 2,574.00 3,645.00 1,782.00 2,313.00

Determination of the reported inventory value assuming the lower of Cost or Net realizable Value rule applied to the total Inventory: Product Ash Beech Cedar Fir Apple Cherry Total Inventory Inventory Value $ $ $ $ $ $ $ Cost 1,880.00 $ 1,780.00 $ 1,930.00 $ 3,530.00 $ 1,580.00 $ 1,980.00 $ 12,680.00 $ NRV 1,782.00 $ 2,223.00 $ 2,574.00 $ 3,645.00 $ 1,782.00 $ 2,313.00 $ 14,319.00 $ Lower of Cost or NRV 1,782.00 1,780.00 1,930.00 3,530.00 1,580.00 1,980.00 12,582.00