On December 31, 2013, a company had an item (that it sells regularly) which was returned by a customer because it was defective. Although it originally cost $150, and was sold to the customer for $280, it can be sold as used for only $140. Prior to making it saleable the company must spend $30 to repair it and the estimated cost to resell it is $20. The company expects a normal profit of 10 percent on the resale of damaged merchandise. The net realizable value (NRV) of this item is:
A) $76
B) $90
C) $110
D) $150

Question

Quizplus · Accepted Answer

The net realizable value (NRV) is calculated as the estimated selling price minus the estimated costs of completion, disposal, and transportation. Here, the estimated selling price is $140 (since it can be sold as used for this amount), the costs to repair are $30, and the costs to resell are $20. Thus, NRV = $140 - $30 - $20 = $90.

On December 31, 2013, a Company Had an Item (That