Question

Ross Electronics has one product in its ending inventory. Per unit data consist of the following: cost, $36; selling price, $48; selling costs, $6. What unit value should Ross use when applying the lower of cost or net realizable value rule to ending inventory?

Answer 1

$36

Step-by-step explanation:

According to IAS 2 inventories, Inventory is to be recognized at cost but subsequently carried at the lower of cost or net realizable value.

Given that Per unit data consist of the following: cost, $36; selling price, $48; selling costs, $6.

Applying the lower of cost or net realizable value rule to ending inventory, the unit value

cost = $36

net realizable value = $48 - $6 = $42

The lower of cost or net realizable value is the cost. Hence, the unit value of inventory will be the cost at $36.

Answer 2

Unit value of $36 Ross should use when applying the lower of cost or net realizable value rule to ending inventory.

Step-by-step explanation:

Inventory should be recorded on:

Lower of

• Cost

• Net realizable value

Cost of product = $36 per unit

Net realizable value = selling price -selling cost = $48 - $6 = $42

So the lower value is the cost value of $36 for the product. So, this value should be used in order to determine the cost of ending inventory.