ACCT 3001 Lecture Notes - Lecture 6: Price Ceiling, Profit Margin, Conservation Movement
Document Summary
Note: retail inventory method (pages 458-464) is omitted. Lower of cost or net realizable value (lcnrv) May decline in value below its original cost (becomes obsolete: write down inventory to nrv (report the loss) Item-by-item: items individually: preferred by many companies, tax rules required when practical, results in most conservative inventory valuation. A company abandons the historical cost principle when the future utility (revenue-producing ability) of the asset drops below its original cost. Cost: acquisition price computed using historical cost-based methods (spec id, average cost, Net realizable value: net amount company expects to realize (receive) from the sale (estimated selling price less costs of completion, disposal, and transportation) Be9-2 floyd corporation has the following four items in its ending inventory. Item by item: (total lcnrv total cost) 15505 14,600 = no write down because cost is lower. Recording nrv instead of cost: gaap does not specify. 2 methods- cost of goods sold method and loss method (for debit).
