Question

Swifty 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 $179 $144 Canon 8 160 180 Light Meters Vivitar 12 113 109 Kodak 10 116 142 What amount should be reported on Swifty Camera Shop’s financial statements, assuming the lower-of-cost-or-net realizable value rule is applied?

Answer 1

$4468

Step-by-step explanation:

Using the lower-of-cost-or-net-realizable value means that the items of closing inventory should be valued at lower of purchase price(invoice price) and the net realizable value,where net realizable means the estimated selling price less estimated cost of making the sale.

Minolta would be valued at NRV of $144 i.e $144*5=$720

Cannon would be valued at cost of $160 i.e $160*8=$1280

Vivitar would be valued at NRV of $109 i.e $109*12=$1,308

Kodak would be valued at cost of $116 i.e $116*10=$1160

Total value of closing inventory on Swifty Camera's Shop financial statement=$720+$1280+$1308+$1160=$4468