Question 2E - 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. Item DE F GH I Estimated selling price \(120 \)110 \(95 \)90 \(110 \)90 Cost 75 80 80 80 50 36 Cost to complete 30 30 25 35 30 30 Selling costs 10 18 10 20 10 20 Instructions Using the LCNRV rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2017, for each of the inventory items above.

Step-by-Step Solution

Answer

The value of inventory for item D, E, F,G, H, and I equals $75, $62, $60, $35, $50, and $36 respectively.

Calculation of net realizable value

Net realizable value is calculated as follows: 

	Item
	D	E	F	G	H	I
Estimated selling price	$120	$110	$95	$90	$110	$90
Less: Cost to complete	30	30	25	35	30	30
Less: Cost to sell	10	18	10	20	10	20
Net realizable value	$80	$62	$60	$35	$70	$40

Calculation of LCNRV

LCNRV for each item is calculated as follows: 

	Item
	D	E	F	G	H	I
Cost	$75	$80	$80	$80	$50	$36
Net realizable value	80	62	60	35	70	40
LCNRV	$75	$62	$60	$35	$50	$36

 

Thus, the inventory value for item D equals $75, item E equals $62, item F equals $60, item G equals $35, item H equals $50, and item I equals $36.