Carlsberg Corporation has 2,000 units of product#1and 4,000 units of product#2 in its inventory at December 31, 2014. Specific data with respect to each product follows: What amount will be reported on the company statement of financial position at December 31, 2014 for ending inventory using lower-of-cost-or-net realizable value?

Question

Carlsberg Corporation has 2,000 units of product#1and 4,000 units of product#2 in its inventory at December 31, 2014. Specific data with respect to each product follows:  What amount will be reported on the company statement of financial position at December 31, 2014 for ending inventory using lower-of-cost-or-net realizable value?

Quizplus · Accepted Answer

To determine the ending inventory using the lower-of-cost-or-net realizable value method, we need to compare the cost of inventory with its net realizable value (NRV) and use the lower of the two as the ending inventory value. 
Product#1 cost = 100 CHF/unit, NRV = 120 CHF/unit 
Product#2 cost = 70 CHF/unit, NRV = 80 CHF/unit 
So, for product#1, we use the NRV of 120 CHF/unit since it's higher than the cost. For product#2, we use the cost of 70 CHF/unit since it's lower than the NRV. 
Value of ending inventory = (2,000 units x 120 CHF/unit) + (4,000 units x 70 CHF/unit) = 296,000 CHF. Therefore, the correct answer is C.

Carlsberg Corporation Has 2,000 Units of Product#1and 4,000 Units of Product#2