Question

A company reports inventory using the lower-of-cost and net realizable value. Below is information related to its year-end inventory: Inventory Quantity Cost NRV Unit A 10 $30 $32 Unit B 18 43 40 Unit C 12 23 27 Unit D 15 18 17 a. Calculate ending inventory under the lower-of-cost and net realizable value. b. Prepare the necessary adjusting entry to inventory. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Calculate ending inventory

		Per unit		Total		Value under LCM
Product	Quantity	Cost	NRV	Cost	NRV
A	10	30	32	300	320	300
B	18	43	40	774	720	720
C	12	23	27	276	324	276
D	15	18	17	270	255	255
Total				1620	1619	1551

Ending inventory = $1551

Journal entry

date	account and explanation	Debit	Credit
	Cost of goods sold (1620-1551)	69
	Inventory		69