Question

Linden Company has three inventory items. Utilizing the lower of cost and net realizable value rule, Linden determines the following: Item

A: cost exceeds net realizable value by $20 Item
B: cost is $10 lower than net realizable value Item
C: cost is $5 lower than net realizable value. If Linden applies the rule to individual items, it should recognize a loss of

Answer 1

$20

Step-by-step explanation:

Using the rule of the lower of cost and net realizable value and considering the items given;

A: cost exceeds net realizable value by $20 Item

Adjustment required - Reduce the carrying amount for inventory by $20

B: cost is $10 lower than net realizable value Item

Adjustment required - None

C: cost is $5 lower than net realizable value

Adjustment required - None

From above, If Linden applies the rule to individual items, it should recognize a loss of $20.