Question

Sunland Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, consists of products D, E, F, G, H, and I. Relevant per unit data for these products appear below.

Item D Item E Item F Item G Item H Item I
Estimated selling price $142 $130 $112 $106 $130 $106
Cost 89 94 94 94 59 42
Cost to complete 35 35 30 41 35 35
Selling costs 12 21 12 24 12 24
Using the LCNRV rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2017, for each of the inventory items above.
Item D $
Item E $
Item F $
Item G $
Item H $
Item I $

Answer 1

Item D $124 (cost)

Item E $109 (NRV)

Item F $100 (NRV)

Item G $82 (NRV)

Item H $94 (Cost)

Item I $77 (Cost)

Step-by-step explanation:

Sunland Company uses the LCNRV method.

The LCNRV is a generally acceptable Accounting Practice rule which states that items of stock should be valued at the lower of:

i. Cost of purchasing the stock items or

ii. The net realizable value of the stock items at their current state.

Records that will go to the balance sheet in the case of this firm is :

Step: determine the costs and Net realizable Value based on each item:

D: Cost = $89

Add cost to complete = $35

Total cost = $124

D: Net Realizable value:

Selling price = $142

Less Selling costs = $12

Net realizable value = $130.

For D we go with Cost which is lower ($124)

E: Cost = $94

Add cost to complete = $35

Total cost = $129

E: Net Realizable value:

Selling price = $130

Less Selling costs = $21

Net realizable value = $109.

For E we go with Net Realizable Value, which is lower ($109)

F: Cost = $94

Add cost to complete = $30

Total cost = $124

F: Net Realizable value:

Selling price = $112

Less Selling costs = $12

Net realizable value = $100.

For F we go with Net Realizable Value, which is lower ($100)

G: Cost = $94

Add cost to complete = $41

Total cost = $135

G: Net Realizable value:

Selling price = $106

Less Selling costs = $24

Net realizable value = $82.

For G we go with Net Realizable Value, which is lower ($82)

H: Cost = $59

Add cost to complete = $35

Total cost = $94

H: Net Realizable value:

Selling price = $130

Less Selling costs = $12

Net realizable value = $118.

For H we go with Cost, which is lower ($94)

I: Cost = $42

Add cost to complete = $35

Total cost = $77

I: Net Realizable value:

Selling price = $106

Less Selling costs = $24

Net realizable value = $82

For I we go with Cost, which is lower ($77)