/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q3Q Question:聽What approaches may b... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 9: Q3Q (page 474)

Question:What approaches may be employed in applying the LCNRV procedure? Which approach is normally used and why?

Short Answer

Expert verified

The LCNRV can be applied on the basis of individual items, major categories, and total items. Individual item basis is generally used, as it provides the conservative valuation of inventories in the balance sheet.A

Step by step solution

01

Step-by-step-solutionStep1:

Under the individual items basis (or item-by-item basis), lower-of-cost-or-net-realizable-value is applied to individual items in the inventories.

Under the major categories basis, lower-of-cost-or-net-realizable-value is applied on the basis of different categories of inventories held by the business. In this approach, high selling price is offset partially.

Under the total approach, lower-of-cost-or-net-realizable-value is applied on the basis of the total value of the inventory. In this approach, the high selling price is offset totally.

02

Step 2:

In the normal scenario, individual item basis is followed to apply the LCNRV method as it indicates the correct value of the inventory, for reporting in the balance sheet.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question:At December 31, 2017, Ashley Co. has outstanding purchase commitments for 150,000 gallons, at \(6.20 per gallon, of a raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Assuming that the market price as of December 31, 2017, is \)5.90, how would you treat this situation in the accounts?

(LCNRV鈥擡rror Effect) LaGreca Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, included product X. Relevant per-unit data for product X are as follows. Estimated selling price \(50 Cost 40 Estimated selling costs 14 Normal profi t 9 There were 1,000 units of product X on hand at December 31, 2017. Product X was incorrectly valued at \)38 per unit for reporting purposes. All 1,000 units were sold in 2018. Instructions Compute the effect of this error on net income for 2017 and the effect on net income for 2018, and indicate the direction of the misstatement for each year.

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

Presented below is information related to Aaron Rodgers Corporation for the current year. Beginning inventory \( 600,000 Purchases 1,500,000 Total goods available for sale \)2,100,000 Sales revenue 2,500,000 Instructions Compute the ending inventory, assuming that (a) gross profit is 45% of sales, (b) gross profit is 60% of cost, (c) gross profit is 35% of sales, and (d) gross profit is 25% of cost.

Phil Collins Realty Corporation purchased a tract of unimproved land for \(55,000. This land was improved and subdivided into building lots at an additional cost of \)34,460. These building lots were all of the same size but owing to differences in location were offered for sale at different prices as follows. Group No. of Lots Price per Lot 1 9 \(3,000 2 15 4,000 3 17 2,400 Operating expenses for the year allocated to this project total \)18,200. Lots unsold at the year-end were as follows. Group 1 5 lots Group 2 7 lots Group 3 2 lots Instructions At the end of the fiscal year Phil Collins Realty Corporation instructs you to arrive at the net income realized on this operation to date.
See all solutions

Recommended explanations on Business Studies Textbooks

Strategic Analysis

Read Explanation

Business Development

Read Explanation

International Business

Read Explanation

Financial Performance

Read Explanation

Accounting

Read Explanation

Intermediate Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.