Nine Company uses FIFO to account for inventory Nine Company

Nine Company uses FIFO to account for inventory. Nine Company\'s inventory consists of two products: Product A and Product B. For each product, costs to sell include sales commissions of 10% of the selling price and shipping costs equal to 5% of the selling price. The accounting system revealed the following information as of December 31, 2018.

Determine the amount that Nine Company should report for inventory for Product A as of December 31, 2018.

Product	Units	Cost per unit	Price per unit
A	1,000	$40	$60
B	1,500	90	100

Solution

Net realizable value of Product A = Price per unit-Sales commissions-Shipping costs = 60-(60*10%)-(60*5%)= $51 Inventory is valued at lower of cost or Net Realizable value Lower of $40 or $51 is $40 Amount that Nine Company should report for inventory for Product A = 1000*40 = $40000