Problem #5: Lower of Cost and Net Realizable Value (28 points) At December 31, 2
ID: 2414299 • Letter: P
Question
Problem #5: Lower of Cost and Net Realizable Value (28 points) At December 31, 2018, Ritchie Train Supplies had three products in its ending inventory that it reported at the lower of FIFO cost or market in its GAAP financial statements. Specific data with respect to each product follows: Product #1 Product #2 Product #3 20,000 5,000 Units in ending inventory Per Unit: 10,000 Historical Cost (FIFO) Sales Price Estimated Cost to Dispose $38.00 $35.00 $5.00 $40.00 $60.00 $8.00 $82.00 $100.00 $10.00 Compute the net realizable Value PER UNIT for the products. Present the supporting calculations in the spaces provided in the table below. (6 points) Net Realizable nl Product #1 Product #2 Product #3 Complete the following chart using PER UNIT amounts. (6 points) Net Realizable Value PER UNIT Historic Cost Lower Value Product #1 $38.00 Product #2 $40.00 Product #3 $82.00Explanation / Answer
Answers
Net Realizable Value per unit
Supporting Calculation [Sales Price - Estimated cost to dispose]
Product #1
$ 30.00
[35 - 5]
Product #2
$ 52.00
[60 - 8]
Product #3
$ 90.00
[100 -10]
Net Realizable Value per unit
Per unit Historical Cost
Lower Value
Product #1
$ 30.00
$ 38.00
$ 30.00
Product #2
$ 52.00
$ 40.00
$ 40.00
Product #3
$ 90.00
$ 82.00
$ 82.00
Units in Ending Inventory
Lower Value
Total LCNRV
Per unit Historical Cost
Total Historic Cost
Product #1
10000
$ 30.00
$ 3,00,000.00
$ 38.00
$ 3,80,000.00
Product #2
20000
$ 40.00
$ 8,00,000.00
$ 40.00
$ 8,00,000.00
Product #3
5000
$ 82.00
$ 4,10,000.00
$ 82.00
$ 4,10,000.00
TOTALS
$ 15,10,000.00
TOTALS
$ 15,90,000.00
Answer = $ 80,000
A
Total Historic Cost
$ 15,90,000.00
B
Total LCNRV
$ 15,10,000.00
C=A-B
Unrealized Loss on Valuation
$ 80,000.00
Date
Accounts Name
Debit
Credit
31-Dec-18
Unrealized Loss On valuation
$ 80,000.00
$ -
Inventory
$ -
$ 80,000.00
Net Realizable Value per unit
Supporting Calculation [Sales Price - Estimated cost to dispose]
Product #1
$ 30.00
[35 - 5]
Product #2
$ 52.00
[60 - 8]
Product #3
$ 90.00
[100 -10]
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