ABC company paid $10 wholesale for one unit of inventory for resale in the retai
ID: 2515147 • Letter: A
Question
ABC company paid $10 wholesale for one unit of inventory for resale in the retail market. The same inventory can now be purchased for $9. The retail sales price of the inventory is now $13, however, it normally costs $2 to sell each unit. Using the lower-of-cost-and-net-realizable-value rule the inventory would be reported on ABC company 's balance sheet at___.
ABC company paid $10 wholesale for one unit of inventory for resale in the retail market. The same inventory can now be purchased for $9. The retail sales price of the inventory is now $11, however, it normally costs $2 to sell each unit. Using the lower-of-cost-and-net-realizable-value rule the inventory would be reported on ABC company 's balance sheet at___.
Explanation / Answer
Cost = 10
Net realizable value = Selling price - Cost to sell
= 13 - 2
= 11
Using the lower-of-cost-and-net-realizable-value rule the inventory would be reported on ABC company 's balance sheet at 10 (lower of 10 and 11)
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Cost = 10
Net realizable value = Selling price - Cost to sell
= 11 - 2
= 9
Using the lower-of-cost-and-net-realizable-value rule the inventory would be reported on ABC company 's balance sheet at 9 (lower of 9 and 10)