Fundy Corp.has the following information about their inventory at year-end: $\begin{array}{lrr}\text { Item}&\text { Cost }&\text { NRV }\\hline
\# 1 & \$ 12,000 & \$ 12,500 \
\# 2 & 21,250 & 19,750 \
\# 3 & 18,600 & 18,500
\end{array}$ If Fundy values their inventory at the lower of cost and net realizable value on a total inventory basis, what would be their year-end inventory balance on the balance sheet?
A)$50,250
B)$50,750
C)$51,850
D)$52,350

Question

Quizplus · Accepted Answer

The lower of cost and net realizable value (NRV) for each item is: Item #1: $12,000 (cost is lower), Item #2: $19,750 (NRV is lower), Item #3: $18,500 (NRV is lower). Adding these amounts together gives a total inventory balance of $50,250. However, the question specifies valuation on a total inventory basis, not item by item. The total cost is $12,000 + $21,250 + $18,600 = $51,850, and the total NRV is $12,500 + $19,750 + $18,500 = $50,750. Since the total NRV is lower than the total cost, the year-end inventory balance on the balance sheet should be $50,750.

Fundy Corp If Fundy Values Their Inventory at the Lower of Cost