Vaughn Company manufactures desks. Most of the company’s desks are standard mode

Question

Vaughn Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2017, the following finished desks (10 desks in each category) appear in the company’s inventory.

Finished Desks

A

B

C

D

The 2017 catalog was in effect through November 2017, and the 2018 catalog is effective as of December 1; catalog prices are net of the usual discounts.

At what amount should each of the four desks appear in the company’s December 31, 2017, inventory, assuming that the company has adopted a lower-of-FIFO-cost-or-net realizable value (LCNRV) approach for valuation of inventories on an individual-item basis?

Finished Desks

A

B

C

D

2017 catalog selling price $508 $541 $1,015 $1,184 FIFO cost per inventory list 12/31/17 530 508 936 1,083 Estimated cost to complete and sell 56 68 90 147 2018 catalog selling price 564 609 1,015 1,354

Explanation / Answer

Answer- The company has adopted a lower of FIFO -Cost orNEt Realizable Value Approach For valuation of inventory.

Valauation of inventory of the Company as on 31st december 2017 is as follows

Item Name Value as per FIFI-COST approach Value as per net reallizable approach on 31 dec Value of inventory(For 10 desks of each category) A $586 $564 $564*10=$5640 B $576 $609 $576*10=$5760 C $1026 $1015 $1015*10=$10150 D $1230 $1354 $1230*10=$12300 Total Value $33850

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