Question

Nash Camera Shop Inc. uses the lower-of-cost-or-net realizable value basis for its inventory. The following data are available at December 31.

Units Cost per Unit Net Realizable Value per Unit
Cameras
Minolta 5 $167 $164
Canon 8 134 156
Light Meters
Vivitar 11 118 114
Kodak 9 125 145

What amount should be reported on Nash Camera Shop's financial statements, assuming the lower-of-cost-or-market rule is applied?

Answer 1

The total inventory amount to be reported on Nash Camera Shop's financial statements using the lower-of-cost-or-net realizable value rule is $4,271.

Step-by-step explanation:

The question pertains to determining the value of inventory using the lower-of-cost-or-net realizable value (LCNRV) method. To calculate the amount to be reported on the financial statements, we must compare the cost per unit with the net realizable value (NRV) per unit for each item in inventory and use the lower of the two values.

Minolta Cameras: 5 units × $164 (NRV) = $820 (since NRV is less than cost)

Canon Cameras: 8 units × $134 (cost) = $1,072 (since cost is less than NRV)

Vivitar Light Meters: 11 units × $114 (NRV) = $1,254 (since NRV is less than cost)

Kodak Light Meters: 9 units × $125 (cost) = $1,125 (since cost is less than NRV)

The total amount to be reported for inventory on Nash Camera Shop's financial statements using the LCNRV rule is $820 + $1,072 + $1,254 + $1,125 = $4,271.

Answer 2

$4,271

Step-by-step explanation:

IAS 2 requires that inventory be measured at the lower of cost or net realizable value. Since inventory is initially recognized at cost, where the cost is lower than the net realizable value (NRV), the cost is written down to the NRV.

Unit Cost per unit NRV Per unit adjusted cost Inventory amount

Minolta 5 167 164 164 820

Canon 8 134 156 134 1072

Vivitar 11 118 114 114 1254

Kodak 9 125 145 125 1125

Total 4,271