ExpertHard1 markMultiple Choice
CPA · Question 19 · Area II: Balance Sheet Accounts
Coastal Corp. has the following data for its inventory at year-end:<br/><br/>Product A: 100 units, Cost $50/unit, NRV $45/unit<br/>Product B: 200 units, Cost $30/unit, NRV $35/unit<br/>Product C: 150 units, Cost $20/unit, NRV $18/unit<br/><br/>Using the lower of cost or net realizable value approach, what is the total inventory value?
Coastal Corp. has the following data for its inventory at year-end:<br/><br/>Product A: 100 units, Cost $50/unit, NRV $45/unit<br/>Product B: 200 units, Cost $30/unit, NRV $35/unit<br/>Product C: 150 units, Cost $20/unit, NRV $18/unit<br/><br/>Using the lower of cost or net realizable value approach, what is the total inventory value?
Answer options:
A.
$14,500
B.
$15,200
C.
$16,000
D.
$13,200
How to approach this question
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.
Full Answer
D.$13,200✓ Correct
ASC 330 requires inventory to be measured at lower of cost or net realizable value on an item-by-item basis. Product A: lower of $5,000 vs $4,500 = $4,500; Product B: lower of $6,000 vs $7,000 = $6,000; Product C: lower of $3,000 vs $2,700 = $2,700. Total = $13,200.
Common mistakes
Not applying the constraint item-by-item, using cost when NRV is lower, or mathematical errors in extensions
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