Iris Company has provided the following information regarding two of its items of inventory at year-end: • There are 100 units of Item A,having a cost of $20 per unit,a selling price of $24 and a cost to sell of $6 per unit.
• There are 50 units of Item B,having a cost of $50 per unit,a selling price of $56 and a cost to sell of $4 per unit.
How much is the ending inventory using lower of cost or net realizable value?
A)$4,100.
B)$4,300.
C)$4,400.
D)$4,500.

Question

Quizplus · Accepted Answer

To calculate the net realizable value of the inventory items, we need to subtract the cost to sell from the selling price. 
For Item A, the net realizable value is $18 ($24 selling price - $6 cost to sell). 
For Item B, the net realizable value is $52 ($56 selling price - $4 cost to sell).

Next, we compare the cost of each item to its net realizable value. 
For Item A, the cost is $20 per unit and the net realizable value is $18 per unit. So, the lower of the two is the net realizable value. Therefore, the ending inventory value for Item A is 100 units x $18 net realizable value = $1,800.

For Item B, the cost is $50 per unit and the net realizable value is $52 per unit. So, the lower of the two is the cost. Therefore, the ending inventory value for Item B is 50 units x $50 cost = $2,500.

Adding the ending inventory values for both items gives us a total of $1,800 + $2,500 = $4,300. Therefore, the answer is B.

Iris Company Has Provided the Following Information Regarding Two of Its