Question

Bobcat Coffee has the coffee division and the retail expresso machine division. Inventories are assessed by total inventory balance by product line when considering if any inventory write-downs are necessary. Below is a list of individual coffee types, their costs on Bobcats books and the related NRV for each. Bobcat uses the lower of Cost or NRV approach. Any write-downs are adjusted to COGS.

Calculate if any inventory write-down is necessary and book any necessary entries, if any.

Cost NRV

Light Roast 10,000 12,500

Medium Roast 15,000 18,750

Dark Roast 15,000 18,750

Premium Roast  5,000 3,500

Total    45,000 53,500

Answer 1

Only in case of Premium Roast, Cost is higher than NRV, so written down of $ 1,500 will be required

Journal Entry -

Cost of Goods Sold  A/c Dr. $ 1,500

To Inventory A/c $ 1,500

	Cost	NRV	If Cost > NRV, write down ( Cost - NRV)
Light Roast	$                   10,000	$                                12,500	No
Medium Roast	$                   15,000	$                                18,750	No
Dark Roast	$                   15,000	$                                18,750	No
Premium Roast	$                     5,000	$                                  3,500	$                                         1,500
Total	$                   45,000	$                                53,500