A company manufactures and sells four products; the related inventories are valued at lower-of-cost-or-market.The company considers a profit margin of 20 percent of sales to be normal for all four products.The following information was compiled as of December 31: $\begin{array}{|l|l|l|l|l|}
\hline \text { Product } & \text { Original cost} & \text { Cost to replace } & \begin{array}{l}
\text { Estimated Cost } \
\text { to Complete and } \
\text { sell }
\end{array} & \begin{array}{l}
\text { Expected Selling } \
\text { Price }
\end{array} \
\hline \text { A } & \$ 70 & \$ 84 & \$ 30 &\$160 \
\hline\text { B } & 94 & 90 & 41 &190 \
\hline \text { C } & 35 & 30 & 10 & 60 \
\hline\text { D } & 90 & 92 & 118 & 200 \
\hline
\end{array}$ Using lower-of-cost-or-NRV,the reported unit amount of the ending inventory for Product D is:
A)$90
B)$92
C)$82
D)$118

Question

Quizplus · Accepted Answer

The lower-of-cost-or-NRV is the lower of the original cost or the net realizable value (NRV). The NRV is the estimated selling price less the estimated cost to complete and sell. For Product D, the original cost is $90, the cost to replace is $92, the estimated cost to complete and sell is $118, and the expected selling price is $200. The NRV is $200 - $118 = $82. The lower of the original cost and the NRV is $82.

A Company Manufactures and Sells Four Products; the Related Inventories