Q6IFRS. - Intermediate Accounting (Kieso)

Question

Riegel Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, consists of products D, E, F, G, H, and I. Relevant per unit data for these products appear below. Using the LCNRV rule, determine the proper unit value for statement of financial position reporting purposes at December 31, 2017, for each of the inventory items above.

Step-by-Step Solution

Answer

The cost of inventory for Item D equals $50, Item E equals $62, Item F equals $60, Item G equals $35, Item H equals $50, and Item I equals $30

Step1: Calculation of net realizable value

The net realizable value is calculated as follows:

	Item D	Item E	Item F	Item G	Item H	Item I
Selling Price	$120	$110	$95	$90	$110	$90
Less: Estimated cost to complete	30	30	25	35	30	30
Less: Estimated cost to sell	40	18	10	20	10	30
Net realizable value	$50	$62	$60	$35	$70	$30

Step2: Calculation of inventory price

The inventory price is calculated as follows: 

	Item D	Item E	Item F	Item G	Item H	Item I
Cost	$75	$80	$80	$80	$50	$36
Net realizable value	50	62	60	35	70	30
LCNRV	$50	$62	$60	$35	$50	$30

 

Thus, the cost of inventory from Item D to I equals $50, $62, $60, $35, $50, and $30, respectively.