On December 31,2019,Cruise Company has 10,000 units of an inventory item,which cost $40 per unit when purchased on June 15,2019.The selling price was $60 per unit.On December 30,2019,it was determined that the cost to sell is $24 per unit.At what amount should the 10,000 units of inventory be reported at on the December 31,2019 balance sheet?

Question

Quizplus · Accepted Answer

The inventory should be reported at the lower of cost or net realizable value. Net realizable value is the selling price minus cost to sell. Therefore, the net realizable value of each unit is $60 - $24 = $36.
The cost of each unit is $40.
Since there are 10,000 units, the total cost is $400,000 and the total net realizable value is $360,000.
Therefore, the inventory should be reported at $360,000 on the December 31, 2019 balance sheet, which is option B.

On December 31,2019,Cruise Company Has 10,000 Units of an Inventory