Total Ending Inventory of $5,100 should be reported in the accounts, based on the principle of Lower of Cost or Net Realizable Value
Based on Lower of Cost or Net Realizable Value (NRV) principle, Inventory of Item A should be reported on Cost ($27) as it is lower than the NRV ($32) and Inventory of Item B should be reported on NRV ($22) as it is lower than its Cost ($32). Calculation of Ending Inventory is presented below in tabular form:
InventoryLower of QuantityCost Total Amount
Cost or NRV (Quantity * Cost)
A Cost 140 $27 $3,780
B NRV 60 $22 $1,320
Total Ending Inventory $5,100
The ending inventory under the lower of cost and net realizable value is 5100.
Ending inventory = (140*27) + (60*22)
Therefore, The ending inventory under the lower of cost and net realizable value is 5100.