Question

Blue Spruce Corp. accumulates the following cost and net realizable value data at December 31. Inventory Categories Cost Data Net Realizable Value Cameras $10,960 $12,060 Camcorders 8,850 9,170 DVDs 12,100 11,040 Compute the lower-of-cost-or-net realizable value for company’s inventory.

Answer 1

Answer:

Company's total inventory 30,850

Camaras: 10,960

Camcorders: 8,850

DVDs: 11,040

Explanation:

Camaras:

cost: 10,960

net realizable value: 12,060

Camcorders:

cost: 8,850

net realizable value: 9,170

DVDs:

cost: 12,100

net realizable value: 11,040

Company's total inventory

10,960 + 8,850 + 11,040 = 30,850

We must pick between the historic cost or the net realizable value the lower. The reasoning behind this is the conservatism accounting principle to keep the assets valued at minimum.