Island Solutions is a technology business that retails and wholesales computer hardware along with a wide variety of technology products and solution services. Recently, several competitors have entered the market and introduced new products that might drive some of the business’ inventory into obsolescence. The company has always been IRFS compliant and wants to ensure that it follows the appropriate authoritative literature in determining the accounting for some significant market changes. The accountant at Island Solutions has tasked two small teams of interns from to conduct several pieces of research and dry-run practices.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Island Solutions is a technology business that retails and wholesales computer hardware along with a
wide variety of technology products and solution services. Recently, several competitors have entered
the market and introduced new products that might drive some of the business’ inventory into
obsolescence. The company has always been IRFS compliant and wants to ensure that it follows the
appropriate authoritative literature in determining the accounting for some significant market changes.
The accountant at Island Solutions has tasked two small teams of interns from to conduct several pieces of research and dry-run practices. 

The following data is available for the month of September for two items of inventory that might
soon be render obsolete for Island Solutions.
Inventory balances at September 1, 2023, were as follows:
USB-C (TA3) Hub – 200 @ $400 ea.
USB-C (TB3) Hub – 600 @ $800 ea.

 

USB-C (TA3) HUB

Date Purchases  Sales 
Sep 5 500 @450  
Sep 10   500@540
Sep 15 400 @475  
Sep 20   400 @570
Sep 25 300 @500  

 

USB-C (TB3) HUB

Date  Purchases Sales
Sep 10 600 @900  
Sep 19 300 @950  
Sep 25   900 @1080
Sep 28 500 @1000  
Sep 30   600 @1140

 

In addition to the inventory data provided above, Island Solutions accountant has made the
following projections in light of the market changes.

  USB-C (TA3) HUB USB-C (TB3) HUB
Expected Unit Selling Price (net of cost to sell) 580 $1 050 
Costs to Complete 30  150

 

1. Assume Island Solutions applies LCNRV at the major group level and for this purpose places TA3
and TB3 Hubs in one major group, determine the value of inventory that should be reported on
the statement of financial position on September 30, 2023. 

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The question asks for the major group level but the solution is for the individual product level. 

 

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