How to Calculate Net Carrying Value of Inventory for Ian Co.?

What is the net carrying value of Ian Co.'s inventory?

A. $244,000

B. $251,000

C. $258,000

D. $261,000

Answer:

The net carrying value of Ian Co.'s inventory is $251,000.

Calculating the net carrying value of inventory requires consideration of various factors such as net realizable value and normal profit margin. In the case of Ian Co., the net carrying value is determined as follows:

First, calculate the net realizable value (NRV) by subtracting the disposal cost from the estimated selling price: $275,000 - $14,000 = $261,000.

Next, deduct the normal profit margin of $10,000 from the NRV to arrive at the net carrying value: $261,000 - $10,000 = $251,000.

Therefore, the net carrying value of Ian Co.'s inventory is $251,000, which reflects the estimated selling price minus disposal cost and normal profit margin.

Understanding how to calculate the net carrying value of inventory can help businesses make informed decisions about their assets and financial reporting.