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	100			$	5.90			$	6.40
Saws	290				10.90				9.90
Screwdrivers	390				2.90				3.50
Paint products:
1-gallon cans	590				6.90				5.90
Paint brushes	100				4.90				5.40

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

Solution 1:

Almaden Hardware store
Computation of Carrying Value of Ending Inventory on LCM/NRV Basis
Product	Quantity	Cost		Net Realizable Value		Lower of Cost and NRV
		Cost per unit	Total Cost	Per unit	Total	By Individual Products	By Product Categories	By Total Inventory
Tools:
Hammers	100	$5.90	$590.00	$6.40	$640.00	$590.00
Saws	290	$10.90	$3,161.00	$9.90	$2,871.00	$2,871.00
Screwdrivers	390	$2.90	$1,131.00	$3.50	$1,365.00	$1,131.00
Total Tool (A)			$4,882.00		$4,876.00	$4,592.00	$4,876.00
Paint Products:
1-Gallon cans	590	$6.90	$4,071.00	$5.90	$3,481.00	$3,481.00
Paint Brushes	100	$4.90	$490.00	$5.40	$540.00	$490.00
Total Paint (B)			$4,561.00		$4,021.00	$3,971.00	$4,021.00
Total (A+B)			$9,443.00		$8,897.00	$8,563.00	$8,897.00	$8,897.00

Solution 2:

Computation of amount of Loss
By Individual Product	($9443-$8563)	880.00
By Product Categories	($9443-$8897)	546.00
By total Inventory	($9443-$8897)	546.00