Question

Allegro Music sells musical equipment. A detailed list of Allegro Music’s inventory follows:

Inventory item	Number of units — year end	Cost per unit	Total cost	NRV* per unit	Total NRV	LCNRV**
Chime Set	3	$750	2,250	790	2,370
Cymbals	4	70	280	85	340
Drum Sets	3	450	1,350	525	1,575
Flutes	5	650	3,250	775	3,875
Violins	3	1,500	4,500	1,650	4,950
Guitars	7	62	434	45	315
Guitars-acoustic	9	125	1,125	132	1,188
Guitars-electric	12	190	2,280	225	2,700
Keyboards	4	2,200	8,800	2,100	8,400
Pianos-entry	3	2,300	6,900	2,500	7,500
Pianos-introductory	5	4,500	22,500	4,900	24,500
Pianos-intermediate	2	12,000	24,000	14,200	28,400
Pianos-professional	1	22,500	22,500	25,000	25,000
Pianos-upright	2	5,000	10,000	7,500	15,000
Recorders	25	7	175	10	250
Saxophones	3	575	1,725	675	2,025
Triangles	5	55	275	65	325
Xylophones	4	245	980	300	1,200
			TOTAL= 113,324		Total= 129,913

*NRV = net realizable value
**LCNRV = lower of cost and net realizable value

Required:
Complete the schedule above and prepare the year-end adjusting entry to record the inventory at the lower of cost and net realizable value.

Answer 1

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Allegro Music	A	B	C=A*B	D	E=A*D	F= Lower of C or E
Inventory item	Number of units	Cost per unit	Total cost	NRV* per unit	Total NRV	LCNRV**
Chime Set	3.00	750.00	2,250.00	790.00	2,370.00	2,250.00
Cymbals	4.00	70.00	280.00	85.00	340.00	280.00
Drum Sets	3.00	450.00	1,350.00	525.00	1,575.00	1,350.00
Flutes	5.00	650.00	3,250.00	775.00	3,875.00	3,250.00
Violins	3.00	1,500.00	4,500.00	1,650.00	4,950.00	4,500.00
Guitars	7.00	62.00	434.00	45.00	315.00	315.00
Guitars-acoustic	9.00	125.00	1,125.00	132.00	1,188.00	1,125.00
Guitars-electric	12.00	190.00	2,280.00	225.00	2,700.00	2,280.00
Keyboards	4.00	2,200.00	8,800.00	2,100.00	8,400.00	8,400.00
Pianos-entry	3.00	2,300.00	6,900.00	2,500.00	7,500.00	6,900.00
Pianos-introductory	5.00	4,500.00	22,500.00	4,900.00	24,500.00	22,500.00
Pianos-intermediate	2.00	12,000.00	24,000.00	14,200.00	28,400.00	24,000.00
Pianos-professional	1.00	22,500.00	22,500.00	25,000.00	25,000.00	22,500.00
Pianos-upright	2.00	5,000.00	10,000.00	7,500.00	15,000.00	10,000.00
Recorders	25.00	7.00	175.00	10.00	250.00	175.00
Saxophones	3.00	575.00	1,725.00	675.00	2,025.00	1,725.00
Triangles	5.00	55.00	275.00	65.00	325.00	275.00
Xylophones	4.00	245.00	980.00	300.00	1,200.00	980.00
Ending Inventory			113,324.00		129,913.00	112,805.00
Reduction in value			519.00

Year end entry
Account	Debit $	Credit $
Loss on valuation of inventory	519.00
Inventory		519.00