Never Company developed the following information about its inventories in applying the lower-of-cost-or-net realizable value (LCNRV) basis in valuing inventories: If Never applies the LCNRV basis, the value of the inventory reported on the statement of financial position would be

Question

Never Company developed the following information about its inventories in applying the lower-of-cost-or-net realizable value (LCNRV) basis in valuing inventories:  If Never applies the LCNRV basis, the value of the inventory reported on the statement of financial position would be

Quizplus · Accepted Answer

To apply LCNRV basis, the cost and net realizable value (NRV) of each item in inventory are compared and whichever is lower is chosen as the basis for valuing the inventory.

For Never Company, the inventory breakdown is as follows:

Product A: 
Cost per unit = $20
NRV per unit = $22
Units on hand = 12,000

Therefore, the inventory value for Product A using LCNRV basis would be:

{12,000 units x $20 (cost per unit)} = $240,000

Product B: 
Cost per unit = $25
NRV per unit = $24
Units on hand = 1,600

Therefore, the inventory value for Product B using LCNRV basis would be:

{1,600 units x $24 (NRV per unit)} = $38,400

Total inventory value using LCNRV basis = $240,000 + $38,400 = $278,400

Hence, the correct answer is option C) $350,000.

Never Company Developed the Following Information About Its Inventories in Applying