Question

H.T. Tan Company is preparing the annual financial statements dated December 31 of the current year. Ending inventory information about the five major items stocked for regular sale follows: ENDING INVENTORY, CURRENT YEARItemQuantityon HandUnit Cost When Acquired (FIFO)Net Realizable Value (Market) at Year-EndA 59 $24 $21 B 89 39 49 C 19 57 61 D 79 34 39 E 359 19 14 Required:Compute the valuation that should be used for the current year ending inventory using lower of cost or net realizable value applied on an item-by-item basis.

Answer 1

Answer:

The calculation is shown below:

Explanation:

According to the scenario, the computation of the following data can be done as follows:

Total Cost = Quantity × Unit Cost

Total NRV = Net Realizable Value × Quantity

So, by putting the value in the formula, we get,

Item       Quantity     Total Cost        Total NRV    Lower of cost or NRV

A             59   $1,416.00         $1,239.00         $1,239.00

B             89   $3,471.00         $4,361.00         $3,471.00

C             19   $1,083.00        $1,159.00         $1,083.00

D             79   $2,686.00        $3,081.00         $2,686.00

E             359   $6,821.00         $5,026.00              $5,026.00

Total                   $15,477.00        $14,866.00         $13,505.00