Question

Determining Lower of Cost or Net Realizable Value (NRV)

Crane Company had the following inventory at December 31, 2017.

Unit Price

QuantityCostNRV

Desks

Model 900174$190$210

Model 900249280268

Model 900324350360

Cabinets

Model 70011246064

Model 7002849588

Model 700354130126

a. Determine the ending inventory amount by applying the net realizable value rule to:
1. Each item of inventory.
$Answer

2. Each major category of inventory.
$Answer

3. Total inventory.
$Answer

Answer 1

Answer 1	Each item of inventory	$ 57,228
Answer 2	Each major category of inventory	$ 58,312
Answer 3	Total inventory	$ 58,620

Total Cost = Quantity * Cost per unit

Net realizable value = Quantity * Net realizable Value per unit

Total Inventory = Lower of (Total Cost or Net realizable Value)

Amount of loss = Total Cost - Total Inventory

LCNRV rule applies to individual Products (Each item of inventory)
Products	Quantity	Cost per unit	Net realizable value per unit	Total Cost	Net realizable value	Inventory Value
Desks
Model 9001	74	$        190	$                 210	$ 14,060	$            15,540	$       14,060
Model 9002	49	$        280	$                 268	$ 13,720	$            13,132	$       13,132
Model 9003	24	$        350	$                 360	$    8,400	$              8,640	$         8,400
Cabinets
Model 7001	124	$          60	$                    64	$    7,440	$              7,936	$         7,440
Model 7002	84	$          95	$                    88	$    7,980	$              7,392	$         7,392
Model 7003	54	$        130	$                 126	$    7,020	$              6,804	$         6,804
Total						$       57,228

LCNRV rule applies to Products categories (Each major category of inventory)
Products	Quantity	Cost per unit	Net realizable value per unit	Total Cost	Net realizable value	Inventory Value
Desks
Model 9001	74	$        190	$                 210	$ 14,060	$            15,540
Model 9002	49	$        280	$                 268	$ 13,720	$            13,132
Model 9003	24	$        350	$                 360	$    8,400	$              8,640
Subtotal				36,180	37,312	$       36,180
Cabinets
Model 7001	124	$          60	$                    64	$    7,440	$              7,936
Model 7002	84	$          95	$                    88	$    7,980	$              7,392
Model 7003	54	$        130	$                 126	$    7,020	$              6,804
Subtotal				22,440	22,132	$       22,132
Total						$       58,312

LCNRV rule applies to total inventory
Products	Quantity	Cost per unit	Net realizable value per unit	Total Cost	Net realizable value	Inventory Value
Desks
Model 9001	74	$        190	$                 210	$ 14,060	$            15,540
Model 9002	49	$        280	$                 268	$ 13,720	$            13,132
Model 9003	24	$        350	$                 360	$    8,400	$              8,640
Cabinets
Model 7001	124	$          60	$                    64	$    7,440	$              7,936
Model 7002	84	$          95	$                    88	$    7,980	$              7,392
Model 7003	54	$        130	$                 126	$    7,020	$              6,804
Total				$ 58,620	$            59,444	$       58,620