WorksheetsLCNRV
Total questions: 9
Worksheet time: 6mins
Inventories shall be measured at
cost
net realizable value
lower of cost of net realizable value
higher of cost and net realizable value
LCNRV of inventory
is always either the net realizable value or its cost.
should always be equal to net realizable value.
may sometimes be less than net realizable value.
should always be equal to net realizable value less costs to complete.
net realizable value is
current replacement cost
estimated selling price
expected selling price less expected cost to complete and expected cost of disposal
estimated selling price less estimated cost to complete and estimated cost of disposal
inventories are usually written down to net realizable value
item by item
by classification
by total
by segment
Under this method Inventory is recorded at lower of cost or net realizable value (LCNRV)
Direct Method
Allowance Method
When the cost-of-goods-sold method is used to record inventory at net realizable value
a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline.
there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale.
only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements.
the net realizable value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold.
The credit balance that arises when a net loss on a purchase commitment is recognized should be
presented as a current liability.
subtracted from ending inventory.
presented as an appropriation of retained earnings.
presented in the income statement.
Whether direct method or allowance method is used, the cost of goods sold must be the same
TRUE
FALSE
Based on a physical inventory at year-end, Cherry Company determined the chocolate inventory on a FIFO basis at; P2,600,000 with a replacement cost of P2,500,000.
Cherry Company estimated that, after further processing costs 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.
What amount should be reported as chocolate inventory at year-end?
2,800,000
2,600,000
2,400,000
2,500,000
3,000,000
