Twenty units of inventory on hand at the end of the year are recorded at their cost of $5.00 per unit using FIFO. Current net realisable value is $4.50 per unit. What amount would be reported as inventory on the balance sheet?

Question

Quizplus · Accepted Answer

Under the lower of cost or net realizable value rule, inventory should be reported at the lower of its cost or net realizable value. Here, the cost is $5.00 per unit, and the net realizable value is $4.50 per unit. Therefore, the inventory should be reported at $4.50 per unit, resulting in a total of $90.00 (20 units x $4.50).

Twenty Units of Inventory on Hand at the End of the Year