Determine the proper balance in Allowance to Reduce Inventory |accounting

Determine the proper balance in Allowance to Reduce Inventory |accounting

Determine the proper balance in Allowance to Reduce Inventory to NRV at May 31, 2017.

(b)For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would be recorded (using the loss method) due to the change in Allowance to Reduce Inventory to NRV.

(c)Explain the rationale for the use of the LCNRV rule as it applies to inventories.

P9-3 (LO1) (LCNRV—Cost-of-Goods-Sold and Loss) Malone Company determined its ending inventory at cost and at LCNRV at December 31, 2017, December 31, 2018, and December 31, 2019, as shown below.

Cost
NRV
12/31/17
$650,000
$650,000
12/31/18
780,000
712,000
12/31/19
905,000
830,000