A company reports inventory using the lower of cost and net realizable value. Below is information related to its year-end inventory: Inventory Quantity Cost NRV Item A 140 $ 27 $ 32 Item B 60 32 22 a. Calculate ending inventory under the lower of cost and net realizable value

Total Ending Inventory of $5,100 should be reported in the accounts, based on the principle of Lower of Cost or Net Realizable Value

Explanation:

Based on Lower of Cost or Net Realizable Value (NRV) principle, Inventory of Item A should be reported on Cost ($27) as it is lower than the NRV ($32) and Inventory of Item B should be reported on NRV ($22) as it is lower than its Cost ($32). Calculation of Ending Inventory is presented below in tabular form:

Inventory Lower of Quantity Cost Total Amount

Cost or NRV (Quantity * Cost)

A Cost 140 $27 $3,780

B NRV 60 $22 $1,320

Total Ending Inventory $5,100

The ending inventory under the lower of cost and net realizable value is 5100.

Explanation:

Ending inventory = (140*27) + (60*22)

= 5100

Therefore, The ending inventory under the lower of cost and net realizable value is 5100.