Chapter 9, Problem 3CA

To determine

LCNRV: LCNRV refers to the lower-of-cost-and-net realizable value. Inventories are generally recorded at cost. When there is evidence that there is a disposal of the usefulness of inventory goods in the ordinary course of business being lesser than cost, then the difference will be recognized as a loss in the current period. The inventory will be stated as the “net realizable value” in the financial statements.

(a)

To determine the amount of inventory to be reported in the balance sheet of O Corporation.

To determine

(b)

To determine the reason for using the rule of LCNRV to report inventory.

To determine

(c)

To determine the effect of ending inventory and cost of goods sold by using the average cost inventory method.