Never Company Developed the Following Information About Its Inventories in Applying

question 56

Multiple Choice

Never Company developed the following information about its inventories in applying the lower-of-cost-or-net realizable value (LCNRV) basis in valuing inventories:
$\begin{array}{rrr}\text { Product }&\text { Cost }&\text { NRV }\\\text { A } & \$ 114,000 & \$ 120,000 \\\text { B } & 80,000 & 76,000 \\\text { C } & 160,000 & 162,000\end{array}$

If Never applies the LCNRV basis, the value of the inventory reported on the statement of financial position would be

• A) \( \$ 354,000 \).
• B) \( \$ 358,000 \).
• C) \( \$ 350,000 \).
• D) \( \$ 362,000 \).

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Definitions:

Commercial Substance

A concept in accounting that a transaction has commercial substance if it significantly changes the economic circumstances of the entities involved.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or business activity.

Fair Value

A valuation method that approximates the amount for which an asset could be bought or sold in a current transaction between participants at arm's length.

Book Value

The net value of an asset or liability according to its balance sheet account balance, taking into account the cost of the asset and accumulated depreciation.