Question

The information shown below relating to the ending inventory was taken at lower of cost or NRV from the records of Electronics Corp.: Per Unit Inventory Classification Quantity Cost NRV Keyboards Stock A 18 $ 96 $ 75 Stock B 23 82 66 Stock C 21 106 125 Hard drives Stock X 31 195 176 Stock Y 52 187 214 CD burners Stock D 84 90 71 Stock E 212 122 146 Required: 1-a. Determine the valuation of the above inventory at cost by individual items. 1-b. Determine the valuation of the above inventory at cost assuming application of lower-of-cost-or-NRV by classifications. 2. Prepare the entry to record the writedown, if any, to reduce ending inventory to lower of cost or NRV. Assume periodic inventory and the allowance method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) The information shown below relating to the ending inventory was taken at lower of cost or NRV from the records of Electronics Corp.: Per Unit Inventory Classification Quantity Cost NRV Keyboards Stock A 18 $ 96 $ 75 Stock B 23 82 66 Stock C 21 106 125 Hard drives Stock X 31 195 176 Stock Y 52 187 214 CD burners Stock D 84 90 71 Stock E 212 122 146 Required: 1-a. Determine the valuation of the above inventory at cost by individual items. 1-b. Determine the valuation of the above inventory at cost assuming application of lower-of-cost-or-NRV by classifications. 2. Prepare the entry to record the writedown, if any, to reduce ending inventory to lower of cost or NRV. Assume periodic inventory and the allowance method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1-a.			Quantity	Cost	NRV	Total cost	Total NRV	Lower of cost or NRV
			a	b	c	d=a*b	e=a*c	Lower of d or e
	Keyboards:
	Stock A		18	96	75	1728	1350	1350
	Stock B		23	82	66	1886	1518	1518
	Stock C		21	106	125	2226	2625	2226
	Hard drives:
	Stock X		31	195	175	6045	5425	5425
	Stock Y		52	187	214	9724	11128	9724
	CD burners:
	Stock D		84	90	71	7560	5964	5964
	Stock E		212	122	146	25864	30952	25864
	Total					55033		52071
1-b.			Quantity	Cost	NRV	Total cost	Total NRV	Lower of cost or NRV
			a	b	c	d=a*b	e=a*c	Lower of d or e
	Keyboards:
	Stock A		18	96	75	1728	1350
	Stock B		23	82	66	1886	1518
	Stock C		21	106	125	2226	2625
	Total					5840	5493	5493
	Hard drives:
	Stock X		31	195	175	6045	5425
	Stock Y		52	187	214	9724	11128
	Total					15769	16553	15769
	CD burners:
	Stock D		84	90	71	7560	5964
	Stock E		212	122	146	25864	30952
	Total					33424	36916	33424
	Total value of inventory							54686
2
a.	Total cost=$ 55033
	Total value of inventory=$ 52071
	Write down required=55033-52071=$ 2962
	Journal entry for write down of inventory:
	Date	Account titles and explanation				Debit	Credit
		Loss due to market decline of inventory				2962
		Allowance to reduce inventory to market					2962
b.	Total cost=$ 55033
	Total value of inventory=$ 54686
	Write down required=55033-54686=$ 347
	Journal entry for write down of inventory:
	Date	Account titles and explanation				Debit	Credit
		Loss due to market decline of inventory				347
		Allowance to reduce inventory to market					347