Cost Basis approach of Accounting in Valuation of Inventories. 5. Ryan Lions Co
ID: 2586355 • Letter: C
Question
Cost Basis approach of Accounting in Valuation of Inventories.
5. Ryan Lions Co o products in its year end inventory. Per unit data for each of the two products is as follows: Cost Replacement cost Selling price Selling costs Normal profit margin Product A $50 48 70 Product B $33 25 36 10 Requirements: a. Determine the total dollar amount to report the total inventory of Ryan Lions Corporation, assuming that the lower cost or net realizable value (LCNRV) rule is applied to individual products. b. Determine the total dollar amount to report the total inventory of Ryan Lions Corporation, assuming that the lower of cost or market (LCM) rule is applied to individual products.Explanation / Answer
Answer under part a
Answer under part b
W.Note
Product A Replacement Cost > Lower limit NRV, So Lower limit NRV would be taken as a market value.
Product B Replacement Cost lies between the upper and the lower limit, so Replacement Cost will be the acceptable market value.
Calculation of closing inventory value under LCNRV Item Quantity Cost Per Unit (A) NRV (B) Lower of A or B Total Cost Product A 500 $50 66 50 25,000 Product B 500 $33 31 31 15,500 Total 40,500