Valuing Inventory Using Lower-of-Cost-or-Net Realizable Value Printer Inc. discloses the following ending inventory data. Classification Quantity Cost per Unit NRV per Unit Paper Stock X 400 $300 $330 Stock Y 120 250 230 Ink Stock D 40 $70 $65 Stock E 20 55 62 Toner Stock A 16 $75 $70 Stock B 8 95 80 Stock C 14 100 110 a. Determine the valuation of inventory at cost and at the lower-of-cost-or-net realizable value assuming application by (a) individual items, (b) classifications, and (c) total inventory. The unit costs of the three categories are significantly different; however, within each category the unit costs are similar. 1. Calculate the lower of cost or net realizable value applying the rule to each individual item. Answer 2. Calculate the lower of cost or net realizable value applying the rule by inventory category. Answer 3. Calculate the lower of cost or net realizable value applying the rule to total inventory. Answer b. Prepare the entry to record the ending inventory for each approach in part a assuming any inventory holding loss is recognized as a separate loss and reduces inventory through an allowance account. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Ref. Account Name Dr. Cr. 1 AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer 2 AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer 3 AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer PreviousSave AnswersNext

Valuing Inventory Using Lower-of-Cost-or-Net Realizable Value Printer Inc. discloses the following ending inventory data. Classification Quantity Cost per Unit NRV per Unit Paper Stock X 400 $300 $330 Stock Y 120 250 230 Ink Stock D 40 $70 $65 Stock E 20 55 62 Toner Stock A 16 $75 $70 Stock B 8 95 80 Stock C 14 100 110 a. Determine the valuation of inventory at cost and at the lower-of-cost-or-net realizable value assuming application by (a) individual items, (b) classifications, and (c) total inventory. The unit costs of the three categories are significantly different; however, within each category the unit costs are similar. 1. Calculate the lower of cost or net realizable value applying the rule to each individual item. Answer 2. Calculate the lower of cost or net realizable value applying the rule by inventory category. Answer 3. Calculate the lower of cost or net realizable value applying the rule to total inventory. Answer b. Prepare the entry to record the ending inventory for each approach in part a assuming any inventory holding loss is recognized as a separate loss and reduces inventory through an allowance account. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Ref. Account Name Dr. Cr. 1 AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer 2 AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer 3 AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A Answer Answer PreviousSave AnswersNext

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Valuing Inventory Using Lower-of-Cost-or-Net Realizable Value

Printer Inc. discloses the following ending inventory data.

Classification	Quantity	Cost per Unit	NRV per Unit
Paper
Stock X	400	$300	$330
Stock Y	120	250	230
Ink
Stock D	40	$70	$65
Stock E	20	55	62
Toner
Stock A	16	$75	$70
Stock B	8	95	80
Stock C	14	100	110

a. Determine the valuation of inventory at cost and at the lower-of-cost-or-net realizable value assuming application by (a) individual items, (b) classifications, and (c) total inventory. The unit costs of the three categories are significantly different; however, within each category the unit costs are similar.

1. Calculate the lower of cost or net realizable value applying the rule to each individual item.	Answer
2. Calculate the lower of cost or net realizable value applying the rule by inventory category.	Answer
3. Calculate the lower of cost or net realizable value applying the rule to total inventory.	Answer

b. Prepare the entry to record the ending inventory for each approach in part a assuming any inventory holding loss is recognized as a separate loss and reduces inventory through an allowance account.

Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

Ref.	Account Name	Dr.	Cr.
1	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
2	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
3	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer

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