Question

Switzer, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $900. At the statement date, each computer has a net realizable value of $400. What value should Switzer, Inc., report for the computers at the end of the year? A : $7,200 B : $4,800 C : $3,200 D : $2,400

Answer 1

C. $3,200

Step-by-step explanation:

As per the normal provisions as contained in US GAAP the inventory of goods is generally valued at cost or NRV whichever is lower, since the cost is more then the Net Realizable Value, the inventory shall be valued at net realizable value.

Although the normal retail price is more than cost but since NRV is less they shall be valued at Net Realizable Value.

Thus, the correct answer is:

8 computers
`*` $400 = $3,200