SLR Corporation has 2.300 units of each of its two products in its year-end inventory. Per unit data for each of the products are as follows: Determine the hook value of SLR’s inventory assuming that the lower of cost and net realizable value rule is applied to individual products. What is the before-tax income effect of the adjustment?
1) As per lower of cost and NRV(LCM) rule, value of inventory is calculated lower of cost and net realisable value. The value of inventory as per LCM rule is calculated in table shown below:
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Question & Answer: SLR Corporation has 2.300 units of each of its two products in its year-end inventory. Per unit data for each of the products are…..
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|(a)||(b)||(c )Lower of a and b||(d)||(a*d)||(c*d)|
|Product||cost||NRV||per unit inventory value||unit||cost||lower of cost and NRV|
|1||$ 76||$ 126||$ 76||$ 2,300||$ 174,800||$ 174,800|
|2||$ 47||$ 45||$ 45||$ 2,300||$ 108,100||$ 103,500|
|inventory value||$ 278,300|
|Before tax net income = Cost of Inventory -Value of inventory as per LCM|