Question

Herman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows:
Product 1 Product 2 Product 3
Cost $ 36 $ 106 $ 66
Selling price 88 168 118
Costs to sell 9 72 26

What unit values should Herman use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory?

Answer 1

Answer:

Product 1  - $36

Product 2 -  $ 96  

Product 3  -  $66

Explanation:

The accounting standard for Inventory under IFRS IAS 2 requires that inventory be recognized at cost which includes all the cost incurred to bring the item of inventory to a state or place where the item of inventory becomes available for sale.

These costs includes cost of purchase, freight, Insurance cost during transit etc.  

Subsequently, inventory is to be carried at the lower of cost or net realizable value.

The NRV is the Selling price less the cost to sell.

Given

                             Product 1       Product 2        Product 3

Cost                            $36              $ 106              $ 66

Selling price               $ 88              $ 168             $ 118

Costs to sell                $ 9                $ 72              $ 26

NRV                             $ 79               $ 96              $ 92