28 February, 01:37

# A company reports inventory using the lower of cost and net realizable value. Below is information related to its year-end inventory: Inventory Quantity Cost NRV Unit A 14 \$ 38 \$ 40 Unit B 22 42 39 Unit C 16 27 31 Unit D 19 18 17 a. Calculate ending inventory under the lower of cost and net realizable value. b. Prepare the necessary adjusting entry to inventory. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

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1. 28 February, 02:27
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a. The computation of the ending inventory is shown below:

Inventory Quantity Cost NRV LCM Total inventory

(1) (2) (1 * 2)

Unit A 14 \$38 \$40 \$38 \$532

Unit B 22 \$42 \$39 \$39 \$858

Unit C 16 \$27 \$31 \$27 \$432

Unit D 19 \$18 \$17 \$17 \$323

Total \$2,145

And total cost = Unit A * cost + Unit A * cost + Unit A * cost + Unit A * cost

= 14 * \$38 + 22 * \$42 + 16 * \$27 + 19 * \$18

= \$532 + \$924 + \$432 + \$342

= \$2,230

b. The journal entry is shown below:

Income summary A/c Dr \$85 (\$2,230 - \$2,145)

To Inventory A/c \$85