Problem 4: Lower of cost and net realizable value
(NRV)

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Question: Problem 4: Lower of cost and net realizable value (NRV) The accountant of Sun Shine Ltd. compiled…
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The accountant of Sun Shine Ltd. compiled the following
information about its inventories on December 31, 2015. The selling
cost is 12% of selling price.

Cost

Selling Price

NRV

Inventory Value

Beauty Products A

$160,000

$200,000

Beauty Products B

$160,000

$180,500

Personal Care Products A

$168,000

$189,000

Personal Care Products b

$135,000

$165,000

Baby, Kids, and Toys

$114,000

$125,000

Required:

Determine the amount of inventory to be reported on the
12/31/2015 balance sheet when the lower of cost of NRV rule is
applied

by individual line of products,

by major category of products (I.e., beauty products, personal
care products, and baby/kids products),

by entire inventory.

Prepare the adjusting entry when the rule is applied by
individual line of products.

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