E8.5 (LO 2, 7) (Cost Allocation and Lower of Cost and NRV) During 2023, Buildit Furniture Limited purchased a railway carload of wicker chairs. The manufacturer of the chairs sold them to Buildit for a lump sum of $59,850, because it was discontinuing manufacturing operations and wanted to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are as follows: Type Number of Chairs Estimated Selling Price per Chair $95 55 400 700 Lounge chairs Straight chairs Armchairs 300 85 Buildit estimates that the costs to sell this inventory would be $2 per chair. During 2023, Buildit sells 350 lounge chairs, 210 armchairs, and 120 straight chairs, all at the same prices as estimated. At December 31, 2023, the remaining chairs were put on sale: the lounge chairs at 25% off the regular price, the armchairs at 30% off, and the straight chairs at 40% off. All were expected to be sold at these prices. Instructions a. Rounding percentages to one decimal place and all other amounts to two decimal places, what is the total cost of the chairs remaining in inventory at the end of 2023, using the relative sales value method? b. What is the net realizable value of the chairs remaining in inventory? c. What is the appropriate inventory value to be reported on the December 31, 2023 statement of financial position, assuming the lower of cost and NRV is applied on an individual item basis?
E8.5 (LO 2, 7) (Cost Allocation and Lower of Cost and NRV) During 2023, Buildit Furniture Limited purchased a railway carload of wicker chairs. The manufacturer of the chairs sold them to Buildit for a lump sum of $59,850, because it was discontinuing manufacturing operations and wanted to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are as follows: Type Number of Chairs Estimated Selling Price per Chair $95 55 400 700 Lounge chairs Straight chairs Armchairs 300 85 Buildit estimates that the costs to sell this inventory would be $2 per chair. During 2023, Buildit sells 350 lounge chairs, 210 armchairs, and 120 straight chairs, all at the same prices as estimated. At December 31, 2023, the remaining chairs were put on sale: the lounge chairs at 25% off the regular price, the armchairs at 30% off, and the straight chairs at 40% off. All were expected to be sold at these prices. Instructions a. Rounding percentages to one decimal place and all other amounts to two decimal places, what is the total cost of the chairs remaining in inventory at the end of 2023, using the relative sales value method? b. What is the net realizable value of the chairs remaining in inventory? c. What is the appropriate inventory value to be reported on the December 31, 2023 statement of financial position, assuming the lower of cost and NRV is applied on an individual item basis?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:E8.5 (LO 2, 7) (Cost Allocation and Lower of Cost and NRV) During 2023, Buildit Furniture Limited purchased a railway
carload of wicker chairs. The manufacturer of the chairs sold them to Buildit for a lump sum of $59,850, because it was discontinuing
manufacturing operations and wanted to dispose of its entire stock. Three types of chairs are included in the carload. The three types
and the estimated selling price for each are as follows:
Type
Number of
Chairs
Estimated Selling Price per
Chair
$95
55
400
700
Lounge chairs
Straight
chairs
Armchairs
300
85
Buildit estimates that the costs to sell this inventory would be $2 per chair. During 2023, Buildit sells 350 lounge chairs, 210
armchairs, and 120 straight chairs, all at the same prices as estimated. At December 31, 2023, the remaining chairs were put on sale:
the lounge chairs at 25% off the regular price, the armchairs at 30% off, and the straight chairs at 40% off. All were expected to be
sold at these prices.
Instructions
a. Rounding percentages to one decimal place and all other amounts to two decimal places, what is the total cost of the chairs
remaining in inventory at the end of 2023, using the relative sales value method?
b. What is the net realizable value of the chairs remaining in inventory?
c. What is the appropriate inventory value to be reported on the December 31, 2023 statement of financial position, assuming the
lower of cost and NRV is applied on an individual item basis?
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