Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory.

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Answer 1

Textbook Question

Chapter 9, Problem 9.1Q

Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory.

(a)

Expert Solution

To determine

Merchnadise Inventory: It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

To Explain: LCNRV (Lower of Cost or Net Realizable Value) approach

Explanation of Solution

LCNRV (Lower of Cost or Net Realizable Value) approach is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory.

This approach avoids the inventory to be reported at an amount higher than the cash collected by the company on the sale.

This approach is used by the companies who follow FIFO, average cost or any other method except LIFO or retail inventory method for inventory valuation.

(b)

Expert Solution

To determine

To Explain: LCM (Lower of Cost or Market) approach

Explanation of Solution

LCM (Lower of Cost or Market) approach is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

This approach is used by the companies who follow LIFO or retail inventory method for inventory valuation.

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Cullumber Company uses a job-order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labour cost in Department D, direct labour hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2022, the following estimates were made for the year. Department D E K Manufacturing overhead $1,280,000 $1,500,000 $840,000 Direct labour costs $1,600,000 $1,312,500 $472,500 Direct labour hours 105,000 125,000 42,000 Machine hours 420,000 525,000 120,000 The following information pertains to January 2022 for each manufacturing department. Department D E K Direct materials used Direct labour costs $147,000 $132,300 $81,900 $126,000 $115,500 $39,375 Manufacturing overhead incurred $103,950 $128,600 $73,950 Direct labour hours 8,400 11,550 3,675 Machine hours 35,700 47,250 10,380 Your answer is partially correct. Calculate the predetermined overhead rate for each department.…

Answer 2

Textbook Question

Chapter 9, Problem 9.1Q

Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory.

(a)

Expert Solution

To determine

Merchnadise Inventory: It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

To Explain: LCNRV (Lower of Cost or Net Realizable Value) approach

Explanation of Solution

LCNRV (Lower of Cost or Net Realizable Value) approach is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory.

This approach avoids the inventory to be reported at an amount higher than the cash collected by the company on the sale.

This approach is used by the companies who follow FIFO, average cost or any other method except LIFO or retail inventory method for inventory valuation.

(b)

Expert Solution

To determine

To Explain: LCM (Lower of Cost or Market) approach

Explanation of Solution

LCM (Lower of Cost or Market) approach is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

This approach is used by the companies who follow LIFO or retail inventory method for inventory valuation.

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Answer 3

Textbook Question

Chapter 9, Problem 9.1Q

Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory.

(a)

Expert Solution

To determine

Merchnadise Inventory: It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

To Explain: LCNRV (Lower of Cost or Net Realizable Value) approach

Explanation of Solution

LCNRV (Lower of Cost or Net Realizable Value) approach is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory.

This approach avoids the inventory to be reported at an amount higher than the cash collected by the company on the sale.

This approach is used by the companies who follow FIFO, average cost or any other method except LIFO or retail inventory method for inventory valuation.

(b)

Expert Solution

To determine

To Explain: LCM (Lower of Cost or Market) approach

Explanation of Solution

LCM (Lower of Cost or Market) approach is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

This approach is used by the companies who follow LIFO or retail inventory method for inventory valuation.

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Answer 4

Textbook Question

Chapter 9, Problem 9.1Q

Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory.

(a)

Expert Solution

To determine

Merchnadise Inventory: It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

To Explain: LCNRV (Lower of Cost or Net Realizable Value) approach

Explanation of Solution

LCNRV (Lower of Cost or Net Realizable Value) approach is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory.

This approach avoids the inventory to be reported at an amount higher than the cash collected by the company on the sale.

This approach is used by the companies who follow FIFO, average cost or any other method except LIFO or retail inventory method for inventory valuation.

(b)

Expert Solution

To determine

To Explain: LCM (Lower of Cost or Market) approach

Explanation of Solution

LCM (Lower of Cost or Market) approach is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

This approach is used by the companies who follow LIFO or retail inventory method for inventory valuation.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

(a)

Expert Solution

To determine

Merchnadise Inventory: It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

To Explain: LCNRV (Lower of Cost or Net Realizable Value) approach

Explanation of Solution

LCNRV (Lower of Cost or Net Realizable Value) approach is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory.

This approach avoids the inventory to be reported at an amount higher than the cash collected by the company on the sale.

This approach is used by the companies who follow FIFO, average cost or any other method except LIFO or retail inventory method for inventory valuation.

(b)

Expert Solution

To determine

To Explain: LCM (Lower of Cost or Market) approach

Explanation of Solution

LCM (Lower of Cost or Market) approach is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

This approach is used by the companies who follow LIFO or retail inventory method for inventory valuation.

Answer 8

(a)

Expert Solution

To determine

Merchnadise Inventory: It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

To Explain: LCNRV (Lower of Cost or Net Realizable Value) approach

Explanation of Solution

LCNRV (Lower of Cost or Net Realizable Value) approach is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory.

This approach avoids the inventory to be reported at an amount higher than the cash collected by the company on the sale.

This approach is used by the companies who follow FIFO, average cost or any other method except LIFO or retail inventory method for inventory valuation.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

To determine

Merchnadise Inventory: It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

To Explain: LCNRV (Lower of Cost or Net Realizable Value) approach

Answer 13

Explanation of Solution

LCNRV (Lower of Cost or Net Realizable Value) approach is an approach that compares the cost of the inventory with the net realizable value of the inventory. Net realizable value refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory.

This approach avoids the inventory to be reported at an amount higher than the cash collected by the company on the sale.

This approach is used by the companies who follow FIFO, average cost or any other method except LIFO or retail inventory method for inventory valuation.

Answer 14

(b)

Expert Solution

To determine

To Explain: LCM (Lower of Cost or Market) approach

Explanation of Solution

LCM (Lower of Cost or Market) approach is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

This approach is used by the companies who follow LIFO or retail inventory method for inventory valuation.

Answer 15

(b)

Expert Solution

Answer 16

(b)

Expert Solution

Answer 17

Expert Solution

Answer 18

To determine

To Explain: LCM (Lower of Cost or Market) approach

Answer 19

Explanation of Solution

LCM (Lower of Cost or Market) approach is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.

This approach is used by the companies who follow LIFO or retail inventory method for inventory valuation.

Answer 20

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Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or market (LCM) approach to valuing inventory.

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