Robust Inc.has the following information related to an item in its ending inventory.Acer Top has a cost of $502, a selling price of $568, a cost to complete of $53, and a cost to sell of $38.What is the lower-of-cost-or-net realizable inventory value for Acer Top?

Question

Quizplus · Accepted Answer

The lower-of-cost-or-net realizable value is the lower of the cost or the net selling price of the item. In this case, the net selling price is $568 - $38 = $530. The cost to complete of $53 is not relevant in calculating the lower-of-cost-or-net realizable value, since it is a future cost.

Therefore, the lower-of-cost-or-net realizable value for Acer Top is the lower of its cost ($502) or its net selling price ($530), which is $502. However, this value must also be adjusted for the cost to complete, which is a necessary cost to make the item ready for sale. Therefore, the final lower-of-cost-or-net realizable value for Acer Top is $502 - $53 = $449. Since this is lower than the net selling price, the inventory value for Acer Top must be written down to $449.