You have been asked by the financial vice president to develop a short presentation on the LCNRV method for inventory purposes. The financial VP needs to explain this method to the president because it appears that a portion of the company’s inventory has declined in value.

Instructions The financial vice president asks you to answer the following questions.

(a) What is the purpose of the LCNRV method?

(b) What is meant by “net realizable value”?

(c) Do you apply the LCNRV method to each individual item, to a category, or to the total of the inventory? Explain.

(d) What are the potential disadvantages of the LCNRV method?