Question

Diego Corporation values its inventory at the lower of cost or net realizable value as required by IFRS. Diego has the following information regarding its inventory. Historical cost $100,000 Estimated selling price 98,000 Estimated costs to complete and sell 3,000 Replacement cost 90,000 What is the amount for inventory that Diego should report on the balance sheet under the lower of cost or net realizable value method

Answer 1

$95,000

Step-by-step explanation:

When a company reports its ending inventory at lower of cost or net realizable value (LCNRV), it must value its inventory at whichever is lower:

• historical cost = $100,000
• net realizable value = selling price - estimated costs to complete and sell = $98,000 - $3,000 = $95,000

since $95,000 is lower, then the company will report its inventory at net realizable value.