Pharoah Company developed the following information about its inventories in applying the lower-of-cost-or-net-realizable-value(LCNRV) basis in valuing inventories: Product Cost Market A $141000 $149000 99000 94000 C 198000 201000 After Pharoah Company applies the LCNRV rule, the value of the inventory reported on the balance sheet would be O $444000. O $449000. O $438000. O $433000.
Pharoah Company developed the following information about its inventories in applying the lower-of-cost-or-net-realizable-value(LCNRV) basis in valuing inventories: Product Cost Market A $141000 $149000 99000 94000 C 198000 201000 After Pharoah Company applies the LCNRV rule, the value of the inventory reported on the balance sheet would be O $444000. O $449000. O $438000. O $433000.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter8: Inventories: Special Valuation Issues
Section: Chapter Questions
Problem 3RE: Blue Corporation uses the FIFO cost flow assumption. Presented below is information related to Blues...
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![### Inventory Valuation using Lower of Cost or Net Realizable Value (LCNRV)
Pharoah Company has developed the following information to determine the value of its inventories by applying the lower-of-cost-or-net-realizable-value (LCNRV) rule:
| **Product** | **Cost** | **Market** |
|-------------|----------|-------------|
| A | $141,000 | $149,000 |
| B | $99,000 | $94,000 |
| C | $198,000 | $201,000 |
According to the LCNRV rule, inventory should be recorded at the lower of its historical cost or its market value. This ensures that the inventory is not overstated on the balance sheet.
### Detailed Explanation:
- For **Product A**, the cost ($141,000) is lower than the market value ($149,000). Therefore, the inventory value for Product A will be recorded at the cost of $141,000.
- For **Product B**, the market value ($94,000) is lower than the cost ($99,000). Hence, the inventory value for Product B will be reported at the market value of $94,000.
- For **Product C**, the cost ($198,000) is lower than the market value ($201,000). Thus, the inventory value for Product C will be recorded at the cost of $198,000.
### Calculated Inventory Value:
After applying the LCNRV rule, the inventory reported on the balance sheet would be:
\[ \text{Total Inventory Value} = \$141,000 + \$94,000 + \$198,000 = \$433,000 \]
### Multiple-Choice Question:
After Pharoah Company applies the LCNRV rule, the value of the inventory reported on the balance sheet would be:
- ○ $444,000.
- ○ $449,000.
- ○ $438,000.
- ● $433,000.
The correct answer is $433,000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb33fce48-b282-410a-8ab1-ee022258521a%2Fefb44651-674f-4052-b1d5-c6660d7ccd5e%2Fjwxu9h8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Inventory Valuation using Lower of Cost or Net Realizable Value (LCNRV)
Pharoah Company has developed the following information to determine the value of its inventories by applying the lower-of-cost-or-net-realizable-value (LCNRV) rule:
| **Product** | **Cost** | **Market** |
|-------------|----------|-------------|
| A | $141,000 | $149,000 |
| B | $99,000 | $94,000 |
| C | $198,000 | $201,000 |
According to the LCNRV rule, inventory should be recorded at the lower of its historical cost or its market value. This ensures that the inventory is not overstated on the balance sheet.
### Detailed Explanation:
- For **Product A**, the cost ($141,000) is lower than the market value ($149,000). Therefore, the inventory value for Product A will be recorded at the cost of $141,000.
- For **Product B**, the market value ($94,000) is lower than the cost ($99,000). Hence, the inventory value for Product B will be reported at the market value of $94,000.
- For **Product C**, the cost ($198,000) is lower than the market value ($201,000). Thus, the inventory value for Product C will be recorded at the cost of $198,000.
### Calculated Inventory Value:
After applying the LCNRV rule, the inventory reported on the balance sheet would be:
\[ \text{Total Inventory Value} = \$141,000 + \$94,000 + \$198,000 = \$433,000 \]
### Multiple-Choice Question:
After Pharoah Company applies the LCNRV rule, the value of the inventory reported on the balance sheet would be:
- ○ $444,000.
- ○ $449,000.
- ○ $438,000.
- ● $433,000.
The correct answer is $433,000.
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