Question

Jenks Company developed the following information about its inventories in applying the lower-of-cost-or-net-realizable-value(LCNRV) basis in valuing inventories:

Product Cost NRV
A $90,000 $85,000
B 73,000 79,000
C 153,000 181,000

After Jenks applies the LCNRV rule, the value of the inventory reported on the balance sheet would be:

Answer 1

The value of the inventory reported on the balance sheet would be $311,000.

Step-by-step explanation:

The lower-of-cost-or-net-realizable-value (LCNRV) basis is a method used by companies to value their inventories. It requires companies to compare the cost of their inventories with their net realizable value (NRV) and report the lower amount as the value of the inventory on the balance sheet.

In the case of Jenks Company, the cost of Product A is $90,000, while its NRV is $85,000. Since the NRV is lower, the value of Product A would be reported as $85,000 on the balance sheet.

Similarly, for Product B, the cost is $73,000 and the NRV is $79,000. The lower value of $73,000 would be reported. And for Product C, the cost is $153,000 and the NRV is $181,000. Again, the lower value of $153,000 would be reported on the balance sheet.

Therefore, after applying the LCNRV rule, the value of the inventory reported on the balance sheet would be $85,000 + $73,000 + $153,000 = $311,000.