NRV Class Note

NRV Class Note - MGCR 211 NRV Additional Explanations and...

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MGCR 211 NRV – Additional Explanations and Illustrations As stated by CAD GAAP, the inventory should be recorded at the lower of Historical cost or Net Realizable Value (NRV). The NRV is not the actual selling price of the item since the company will incur some costs to sell this item. Therefore, the NRV is Selling price – selling costs The historical cost is considered when we look at the margin on the item of inventory, but is not a component of NRV. The cost of the CD is considered more like a production cost than a selling cost. NRV applied in an example: Selling price of CD: $15 Cost of the CD:$5 Selling costs are composed of: Commission: $3 Shelving / Display: $1 Shipping: $1 NRV = Selling price ($15) – Selling cost total ($5) = $10 NRV is therefore $10 Recording of Inventory: Per GAAP, the inventory must be recorded at the lower of Cost or NRV. Therefore, we would leave the inventory recorded at $5.
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Change in NRV After the initial recording of the inventory, certain conditions can change. The CD can prove to be
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This note was uploaded on 09/12/2011 for the course MGCR 211 taught by Professor La rocca during the Fall '08 term at McGill.

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NRV Class Note - MGCR 211 NRV Additional Explanations and...

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