Question

Vaughn Company developed the following information about its inventories in applying the lower-of-cost-or-net realizable value (LCM) basis in valuing inventories:

Net realizable Product Cost value
A $111000 $119000
B 81000 74000
C 153000 162000

If Vaughn applies the LCNRV basis, the value of the inventory reported on the balance sheet would be ___
(A) $338000.
(B) $355000.
(C) $362000.
(D) $345000.

Answer 1

(A) $338000.

Step-by-step explanation:

According to the Generally Accepted Accounting principles, the inventory should be recorded at cost or net realizable value whichever is lower.

So, the inventory should be reported by this method in the books of accounts.

Now

For A - $111000

For B - $74,000

For C - $153,000

So, the total value would be equal to

= $111,000 + $74,000 + $153,000

= $338,000