Question 3E - Intermediate Accounting (Kieso)

Question

Sedato Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis. Item No. Quantity Cost per Unit Estimated Selling Price Cost to Complete and Sell 1320 1,200 \(3.20 \)4.50 $1.60 1333 900 2.70 3.40 1.00 1426 800 4.50 5.00 1.40 1437 1,000 3.60 3.20 1.35 1510 700 2.25 3.25 1.40 1522 500 3.00 3.90 0.80 1573 3,000 1.80 2.50 1.20 1626 1,000 4.70 6.00 1.50 Instructions From the information above, determine the amount of Sedato Company inventory

Step-by-Step Solution

Answer

Sedato Company inventory equals $20,465.

Calculation of total cost per item

The total cost per unit is calculated as follows:

Item No.	Quantity	Cost per unit	Total cost
1320	1,200	$3.20	$3,840
1333	900	2.70	2,430
1426	800	4.50	3,600
1437	1,000	3.60	3,600
1510	700	2.25	1,575
1522	500	3.00	1,500
1573	3,000	1.80	5,400
1626	1,000	4.70	4,700

Calculation of net realized value

Net realizable value per item is calculated as follows:

Item No.	Quantity	Estimated selling price	Cost to complete and sell	Net realizable value per unit	Total net realizable value
1320	1,200	$4.50	$1.60	$2.90	$3,480
1333	900	3.40	1.00	2.40	2,160
1426	800	5.00	1.40	3.60	2,880
1437	1,000	3.20	1.35	1.85	1,850
1510	700	3.25	1.40	1.85	1,295
1522	500	3.90	0.80	3.10	400
1573	3,000	2.50	1.20	1.30	3,900
1626	1,000	6.00	1.50	4.50	4,500