Question

A company purchased inventory on January 1, 20X2, for $600,000, and uses the FIFO method. On December 31, 20X2, the inventory had a net realizable value of $550,000 and a replacement cost (market value) of $525,000. What would be the carrying value of the inventory on the company's December 31, 20X2, balance sheet prepared under:

Answer 1

Answer:

See below

Explanation:

It is to be noted that under IFR, inventories are carried at a lower of cost or net realizable value, which is $550,000 in this scenario.

Also, under the United states GAAP, inventories are carried at a lower of cost or market . Here, the replacement cost of $525,000 would be used because it is below NRV and its equal to the difference between NRV and normal profit margin.