Q5IFRS. - Intermediate Accounting (Kieso)

Question

In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases. Cases 1 2 3 4 5 Cost \(15.90 \)16.10 \(15.90 \)15.90 $15.90 Sales price 14.80 19.20 15.20 10.40 17.80 Estimated cost to complete 1.50 1.90 1.65 .80 1.00 Estimated cost to sell .50 .70 .55 .40 .60

Step-by-Step Solution

Answer

The cost of inventory in case 1 equals $12.80, case 2 equals $16.10, case 3 equals $13, case 4 equals $9.20, and case 5 equals $15.90.

Step1: Calculation of net realizable value

The net realizable value is calculated as follows:

 

	Case1	Case 2	Case 3	Case 4	Case 5
Selling Price	$14.80	$19.20	$15.20	$10.40	$17.80
Less: Estimated cost to complete	1.50	1.90	1.65	0.80	1.00
Less: Estimated cost to sell	0.50	0.70	0.55	0.40	0.60
Net realizable value	$12.80	$16.60	$13	$9.20	$16.20

Step2: Calculation of inventory price

The inventory price is calculated as follows:

 

	Case1	Case 2	Case 3	Case 4	Case 5
Cost	$15.90	$16.10	$15.90	$15.90	$15.90
Net realizable value	12.80	16.60	13	9.20	16.20
LCNRV	$12.80	$16.10	$13	$9.20	$15.90

 

Thus, the cost of inventory from Case 1 to case 5 equals $12.80, $16.10, $13, $9.20, and $15.90, respectively.