Question

Sheffield Corp. sells six different products. The following information is available on December 31: Inventory item Units Cost per unit Net Realizable Value per unit Estimated selling price Tin 65 $530 $535 $545 Titanium 20 5300 5250 5410 Stainless steel 85 2120 2020 2100 Aluminum 85 370 300 305 Iron 40 420 430 450 Fiberglass 40 320 315 315 When applying the lower-of-cost-or-net-realizable-value rule to each item, what will Sheffield total ending inventory balance be?

Answer 1

$366,050

Step-by-step explanation:

Item Units Cost p/unit NRV p/unit selling price

Tin 65 $530 $535 $545

Titanium 20 $5300 $5250 $5410

Stainless steel 85 $2120 $2020 $2100

Aluminum 85 $370 $300 $305

Iron 40 $420 $430 $450

Fiberglass 40 $320 $315 $315

when a company uses the lower of cost or net realizable value rule, it will record the price of its inventory at whichever is lower between the two (purchase cost or net realizable value).

ending inventory = (65 x $530) + (20 x $5,250) + (85 x $2,020) + (85 x $300) + (40 x $420) + (40 x $315) = $34,450 + $105,000 + $171,700 + $25,500 + $16,800 + $12,600 = $366,050