Question

Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2021 year-end inventory is as follows:Inventory,by Product Category Quantity Per Unit Net Realizable Value Cost Tools:Hammers 100 $4.80 $5.30 Saws 180 9.80 8.80 Screwdrivers 280 1.80 2.40 Paint products: 1-gallon cans 480 5.80 4.80 Paint brushes 100 3.80 4.30 Required:
1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory.2. Assuming inventory write-downs are common for Almaden, record any necessary year-end adjustment amount for each of the LCNRV applications in requirement 1.

Answer 1

Answer:

Product category        units           cost          NRV   year-end inventory

Tools:

• Hammers            100           $4.80        $5.30           $480
• Saws                    180          $9.80        $8.80          $1,584
• Screwdrivers       280          $1.80        $2.40            $504

Paint products:

• 1-gallon cans      480            $5.80      $4.80         $2,304
• Paint brushes     100            $3.80       $4.30            $380

1) carrying value of year-end inventory:

Tools:                        

• Hammers            $480
• Saws                  $1.584
• Screwdrivers       $504
• sub-total            $1,573

Paint products:         $2,568

• 1-gallon cans    $2,304
• Paint brushes      $380
• sub-total           $2,684

Total                          $5,252

2) adjustment to tools:

Dr Cost of goods sold 180

    Cr Inventory: tools 180

adjustment to paint products:

Dr Cost of goods sold 480

    Cr Inventory: paint products 480

or

total adjustment to inventory account:

Dr Cost of goods sold 660

    Cr Inventory 660