The inventory on hand at year-end for Golen Enterprises is: $\begin{array}{lcccc}\text { Inventory } & \text { Number } & \text { Original } & \text { Current Net } & \text { Current } \
\text { Item } & \text { of Units } & \text { Unit Cost } & \text { Selling Price } & \text { Replacement }\&&&\text { per Unit } & \text { Cost per Unit } \&&\$&\$&\$\
\mathrm{A} & 10 & 40 & 60 & 50 \
\mathrm{~B} & 8 & 70 & 60 & 65
\end{array}$ At what amount should Golen report ending inventory if the lower of cost or net realisable value rule is applied to individual items?

Question

Quizplus · Accepted Answer

The lower of cost or net realizable value (NRV) rule requires inventory to be reported at the lower of its original cost or its current net realizable value. For item A, the cost is $40 and NRV is $60, so use $40. For item B, the cost is $70 and NRV is $60, so use $60. The total inventory value is (10 units * $40) + (8 units * $60) = $880.

The Inventory on Hand at Year-End for Golen Enterprises Is