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Konan, Inc
Konan, Inc. needs to determine its inventory value. The following information pertains to the individual products in ending
inventory:
Product Cost Replacement Cost Selling Price Cost to Sell Normal Profit
L-19 $40 $38 $50 $2 $11
M-23 52 40 60 10 8
N-05 20 24 30 2 6
Assuming Konan uses the FIFO method for costing its inventory, writedown of inventory value for item M-23 is:
Select one:
a. None of the answer choices are correct.
b. $2.
c. $10.
d. $0.
e. $8.
Expert Solution
Net Realizable Value = Selling Price - Cost of Completion
= $60 - $10
Net Realizable Value = $50
Cost = $52
Lower of Cost or Net Realizable Value (LCNRV) = $50
Writedown to reduce cost to Net Realizable Value = $52 - $50 = $2
Assuming Konan uses the FIFO method for costing its inventory, writedown of inventory value for item M-23 is $2.
So, the correct option is B "$2".
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