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 $ 5.70 $ 6.20 Saws 270 10.70 9.70 Screwdrivers 370 2.70 3.30 Paint products: 1-gallon cans 570 6.70 5.70 Paint brushes 110 4.70 5.20 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.

1.

Lower of cost and NRV Net By By Realizable Individual Product By Total Product Cost Value Products Type Inventory Tools: Hammers Saws Screwdrivers Total tools Paint products: 1-gallon cans Paint brushes Total paint Total

Answer 1

• All working forms part of the answer

		Net	By	By
		Realizable	Individual	Product	By Total
Product	Cost	Value	Products	Type	Inventory
	[Units x cost per unit]	[Units x NRV]
Tools:
Hammers	$            627.00	$           682.00	$          627.00
Saws	$         2,889.00	$         2,619.00	$       2,619.00
Screwdrivers	$            999.00	$         1,221.00	$          999.00
Total tools	$         4,515.00	$         4,522.00	$       4,245.00	$       4,515.00
Paint products:			$                 -
1-gallon cans	$         3,819.00	$         3,249.00	$       3,249.00
Paint brushes	$            517.00	$           572.00	$          517.00
Total paint	$         4,336.00	$         3,821.00	$       3,766.00	$       3,821.00
Total	$         8,851.00	$         8,343.00	$           8,011.00	$          8,336.00	$           8,343.00

• Answers
• --Requirement 1

‘a’ = $ 8011
‘b’ = $ 8336
‘c’ = $ 8343

---Requirement 2

Amount of loss for

‘a’ = 8851 – 8011 = $ 840

‘b’ = 8851 – 8336 = $ 515

‘c’ = 8851-8343 = $ 508