Question P9-1 - Intermediate Accounting (Kieso)

Question

Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2017, the following finished desks (10 desks in each category) appear in the company’s inventory. Finished Desks A B C D 2017 catalog selling price \(45 \)48 \(90 \)105 FIFO cost per inventory list 12/31/17 47 45 83 96 Estimated cost to complete and sell 5 11 26 20 2018 catalog selling price 50 54 90 120 The 2017 catalog was in effect through November 2017, and the 2018 catalog is effective as of December 1; catalog prices are net of the usual discounts.

Step-by-Step Solution

Answer

The inventory value per LCNRV is $2,260.

Calculation of net realizable value

Net realizable value is calculated as follows: 

	A	B	C	D
Selling price	$45	$48	$90	$105
Less: Cost to complete and sell	5	11	26	20
Net realizable value per unit (NRV)	$40	$37	$64	$85

Calculation of inventory value per LCNRV

Inventory value per LCNRV is calculated as follows: 

	Units	Cost	NRV	LCNRV (Per Unit)	LCNRV (Total)
A	10	$47	$40	$40	$400
B	10	45	37	37	370
C	10	83	64	64	640
D	10	96	85	85	850
					$2,260

 

Thus, inventory value equals $2,260.