Question

Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2018 year-end inventory is as follows: Inventory, by Product Category Quantity Per Unit Cost Net Realizable Value Tools: Hammers 110 $ 4.70 $ 5.20 Saws 170 9.70 8.70 Screwdrivers 270 1.70 2.30 Paint products: 1-gallon cans 470 5.70 4.70 Paint brushes 110 3.70 4.20

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 that the company reports an inventory write-down as a line item in the income statement, for each of the LCNRV applications determine the amount of the loss.

Answer 1

	Product	Category	Quantity	Cost	Total Cost	NRV	Total NRV	LCNRV	Total LCNRV	Loss
	Tools	Hammers	$ 110.00	$         4.70	$     517.00	$       5.20	$      572.00	$       4.70	$        517.00	0
		Saws	$ 170.00	$         9.70	$ 1,649.00	$       8.70	$ 1,479.00	$       8.70	$    1,479.00	$ 170.00
		Screwdrivers	$ 270.00	$         1.70	$     459.00	$       2.30	$      621.00	$       1.70	$        459.00	0
	A				$ 2,625.00		$ 2,672.00		$    2,455.00
	Paint Products	1- Gallon Cans	$ 470.00	$         5.70	$ 2,679.00	$       4.70	$ 2,209.00	$       4.70	$    2,209.00	$ 470.00
		Paint Brushes	$ 110.00	$         3.70	$     407.00	$       4.20	$      462.00	$       3.70	$        407.00	0
	B				$ 3,086.00		$ 2,671.00		$    2,616.00
	TOTAL (A+B)				$ 5,711.00		$ 5,343.00		$    5,071.00
	1.)
	a.) Individual Products
	Individual Total LCNRV				$ 5,071.00
	b.)Product Categories
	Product Wise LCNRV		=$2625+$2671		$ 5,296.00
	c.) Total Inventory
	Total LCNRV				$ 5,343.00
	2.)
	a.) Individual Products
	Loss		=$170+$470		$     640.00
	b.)Product Categories
	Loss		=$3086-$2671		$     415.00
	c.) Total Inventory
	Loss		=$5711-$5343		$     368.00