Question

Metlock, Inc. uses the lower-of-cost-or-net realizable value basis for its inventory. The following data are available at December 31. Item Units Unit Cost Net Realizable Value Cameras: Minolta 3 $178 $156 Canon 10 147 174 Light meters: Vivitar 15 134 104 Kodak 16 121 133 Determine the amount of the ending inventory by applying the lower-of-cost-or-net realizable value basis. The ending inventory

Answer 1

The $5,434 is the the amount of the ending inventory by applying the lower-of-cost-or-net realizable value basis.

Step-by-step explanation:

Based on the Generally Accepted Accounting Principles (GAAP), the inventory value should be recorded at the cost or net realizable value whichever is lower.

So, by using the above information. Now we can compute the ending inventory.

For Camera :

1. Minolta = Unit price × lower cost of Net realizable value or cost

= 3 × 156

= $468

2. Canon = Unit price × lower cost of Net realizable value or cost

= 10 × 147

= $1,470

For Light Meters:

1. Vivitar = Unit price × lower cost of Net realizable value or cost

= 15 × 104

= $1,560

2. Kodak = Unit price × lower cost of Net realizable value or cost

= 16 × 121

= $1,936

So, the ending inventory is sum of the value of all products which is equals to

Minolta + Canon + Vivitar + Kodak

$468 + $1,470 + $1,560 + $1,936

$5,434

Hence, $5,434 is the the amount of the ending inventory by applying the lower-of-cost-or-net realizable value basis.