Problem A (ACP)
The inventory records of Premiere Company showed the following data:
Units Unit cost Net realizable value
Materials:
R 1,000 110 100
S 2,000 250 260
T 3,000 300 330
Goods in process:
X 4,000 500 480
Y 5,000 650 620
Finished goods:
A 2,000 800 790
B 2,000 730 780
Required:
Determine the valuation of the inventory following the measurement at LCNRV.
Problem B (IAA)
The inventory of Horny Company at the end of the current year is to be recorded at the lower of cost or net
realizable value. Ending inventory data per unit are summarized below:
Item Units Cost Estimated sales price Cost of sell
A 1,000 120 180 30
B 1,500 110 140 20
C 1,200 150 170 30
D 1,800 140 190 30
E 1,700 130 200 40
Required:
Determine the inventory value applying the lower of cost or net realizable value.
Problem C (AICPA Adapted)
Prime Company manufactures and sells 4 products, the inventories of which are priced at cost or net
realizable value whichever is lower. A normal profit of 30% is usually maintained on each product.
The following information is compiled on December 31:
Original Cost to Estimated Normal
Product cost dispose selling price selling price
1 700 150 800 700
2 475 205 950 950
3 255 50 300 350
4 450 260 1,000 900
Required:
Determine the unit value for each product applying the lower of cost or net realizable value in measuring
inventory.
Problem D (AICPA Adapted)
Matrimony Company has determined its December 31, 2021, inventory on a FIFO basis to be P4,000,000.
Information pertaining to the inventory follows:
Estimated selling price 4,050,000
Estimated cost of disposal 200,000
Normal profit margin 500,000
Current replacement cost 3,500,000
The entity records losses that result from applying the lower of cost or net realizable value. On December
31, 2021, what is the carrying amount of the inventory?
a. 4,000,000
b. 3,850,000
c. 3,350,000
d. 3,500,000
Problem E (AICPA Adapted)
Based on a physical inventory taken on December 31, 2021, Cherry Company determined its chocolate
inventory on a FIFO basis at P2,600,000 with replacement cost of P2,500,000. Cherry Company estimated
that, after further processing casts of P1,200,000, the chocolate could be sold as finished candy bars for
P4,000,000. The normal profit margin is 10% of sales.
Under the lower of cost and net realizable value, what amount should be reported as chocolate inventory
in the December 31, 2021 statement of financial position?
a. 2,800,000
b. 2,600,000
c. 2,400,000
d. 2,500,000
Problem F (IFRS)
Oligarchy Company has a partially-completed inventory with the following data:
Production costs incurred to date 2,900,000
Production costs to complete 2,000,000
Transport costs to customer 300,000
Future selling costs 400,000
Selling price 2,800,000
What is the net realizable value of the inventory?
a. 2,100,000
b. 2,800,000
c. 400,000
d. 100,000
Problem G (IFRS)
Gatekeeper Company has two products with cost and selling price as follows:
Product X Product Y
Selling price 2,000,000 3,000,000
Estimated selling cost 600,000 700,000
Materials and conversion cost 1,500,000 1,800,000
General administration cost 300,000 800,000
At year-end, the manufacture of inventory has been completed but no selling cost has yet been incurred.
The inventory shall be measured at what amount?
a. 3,700,000
b. 3,200,000
c. 3,800,000
d. 3,300,000
Problem H (IFRS)
Starstruck Company is a retailer of Italian furniture and has 5 major product lines. On December 31,
2021, the entity provided the following inventory data:
Units Unit cost NRV per unit
Sofas 100 1,000 1,020
Dining tables 200 500 450
Beds 300 1,500 1,600
Closets 400 750 770
Lounge chains 500 250 200
What is the inventory on December 31, 2021 using the lower of cost and net realizable value?
a. 1,040,000
b. 1,075,000
c. 1,998,000
d. 2,033,000
