Q 6.20: Switzer, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $600 and orig

Question

4 years ago

12

Q 6.20: Switzer, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $600 and orig

inally retailed for $900. At the statement date, each computer has a net realizable value of $400. What value should Switzer, Inc., report for the computers at the end of the year?

Business

2 answers:

borishaifa [10] · Answer 1 · 2021-12-16T23:01:06+03:00

borishaifa [10]4 years ago

8 0

Answer:

$400 .Since inventory is valued at cost or market value(current replacement cost) whichever is lower .

Therefore value of inventory : $400*8=$3200

Explanation:

Zina [86] · Answer 2 · 2021-12-17T00:34:33+03:00

Answer:

$400

Explanation:

GAAP principle of Lower of Cost and Net realizable value requires to report the inventory as follow

Inventory Value

Lower of

Cost of Inventory
Net Realizable value of Inventory

In this question Computer was purchased for $600 and current Relalizable value is $400

Lower of

Cost $600
Realizable Value $400

Net Realizable value is lower, so, Switzer, Inc., report the computers for $400 at the end of the year.