Acompany reports inventory using the lower of cost and net realizable value. below is information related to its year-end inventory: inventory quantity cost nrv item a 140 $ 27 $ 32 item b 60 32 22 a. calculate ending inventory under the lower of cost and net realizable value

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Total Ending Inventory of $5,100 should be reported in the accounts, based on the principle of Lower of Cost or Net Realizable Value

Explanation:

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.

Explanation:

Ending inventory  = (140*27) + (60*22)

                             = 5100

Therefore, The ending inventory under the lower of cost and net realizable value is 5100.



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