Question

Problem 9-01 Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2020, the following finished desks (10 desks in each category) appear in the company’s inventory. Finished Desks A B C D 2020 catalog selling price $45 $48 $90 $105 FIFO cost per inventory list 12/31/20 47 45 83 96 Estimated cost to complete and sell 5 11 26 20 2021 catalog selling price 50 54 90 120 The 2020 catalog was in effect through November 2020, and the 2021 catalog is effective as of December 1; catalog prices are net of the usual discounts. At what amount should each of the four desks appear in the company’s December 31, 2020, inventory, assuming that the company has adopted a lower-of-FIFO-cost-or-net realizable value (LCNRV) approach for valuation of inventories on an individual-item basis? Item A $enter a dollar amount Item B $enter a dollar amount Item C $enter a dollar amount Item D $enter a dollar amount Click if you would like to Show Work for this question: Open Show Work

Answer 1

Answer:

Net Realizable Value

A $450

B $430

C $640

D $1,000

OR

Net Lower of Cost or NRVA

A $450

B $430

C $640

D $1,000

Explanation:

Calculation for the amount that each of the four desks should appear in the company’s December 31, 2020

Using this formula

Net Realizable Value = Catalog selling price in the year 2021 - Estimated costs to complete and sell.

Item Cost NET REALIZABLE VALUE

A =(47*10 desks) 470 450(50*10desks-5*10desks)

B =(45*10 desks)450 430(54*10desks-11*10desks)

C =(83*10 desks)830 640(90*10desks-26*10desks)

D =(96*10 desks)960 1,000(120*10desks-10*10desks)

OR

Item Cost NET LOWER OF COST or NRVA

A =(47*10 desks) 470 450(50*10desks-5*10desks)

B =(45*10 desks)450 430(54*10desks-11*10desks)

C =(83*10 desks)830 640(90*10desks-26*10desks)

D =(96*10 desks)960 1,000(120*10desks-10*10desks)

THEREFORE the amount that each of the four desks should appear in the company’s December 31, 2020 will be :

NET REALIZABLE VALUE

A $450

B $430

C $640

D $1,000

OR

NET LOWER OF COST or NRVA

A $450

B $430

C $640

D $1,000