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Chapter 9: Question 2E (page 476)

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.

Short Answer

Expert verified

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

Step by step solution

01

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

02

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.

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