Question 1

Coastal Corp. has the following data for its inventory at year-end:

Product A: 100 units, Cost $50/unit, NRV $45/unit
Product B: 200 units, Cost $30/unit, NRV $35/unit
Product C: 150 units, Cost $20/unit, NRV $18/unit

Using the lower of cost or net realizable value approach, what is the total inventory value?

Accepted Answer

For each product, compare total cost (units × unit cost) to total NRV (units × unit NRV). Use the lower amount for each product, then sum all products for total inventory value.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Not applying the constraint item-by-item, using cost when NRV is lower, or mathematical errors in extensions

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

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