Question: Why might it be difficult to actually determine the NRV
Why might it be difficult to actually determine the NRV of inventory when applying the lower of cost and NRV rule? Provide some examples of when determining NRV might be difficult.
Answer to relevant QuestionsWhy is it necessary to count inventory when a perpetual inventory control system is used? Explain. Why is it necessary to count inventory when a periodic inventory control system is used? Explain.Which cost formula for valuing inventory is best? Explain.Why is the choice of the inventory cost formula important for tax purposes? Explain.Information is provided for Lucan Ltd. below.Required:Calculate cost of goods sold and ending inventory for Lucan Ltd., using the average cost and FIFO cost formulas. Assume Lucan uses a periodic inventorysystem.Puvirnituq Ltd. (Puvirnituq) uses the lower of cost and NRV rule to value its inventory. Puvirnituq’s inventory on December 31, 2017 had 250,000 units of inventory on hand with an average cost of $4.75 per unit and an NRV ...
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