Question

Tatum Company has four products in its inventory. Information about December 31, 2018, inventory is as follows:

Product Inventory

Tatum Company Product	Total Cost	Total Net Realizable Value
101	120,000.00	100,00.00
102	90,000.00	110,000.00
103	60,000.00	50,000.00
104	30,000.00	50,000.00

Assignment:

1. Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products.
   
2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry.

Answer 1

1. Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products

Carrying Value at Decembr 31, 2018 = $270,000

Product	Cost	NRV	Inventory
101	$120,000	$100,000	$100,000	whichever is less
102	$90,000	$110,000	$90,000	whichever is less
103	$60,000	$50,000	$50,000	whichever is less
104	$30,000	$50,000	$30,000	whichever is less
Total	$300,000	$310,000	$270,000

2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry

a. If Inventory write off is immaterial

Date	Account	Debit	Credit
31-Dec	Cost of Goods sold	$30,000
	Inventory		$30,000
	(To write off inventory)

b. If inventory write off is material

Date	Account	Debit	Credit
31-Dec	Loss on inventory write off	$30,000
	Inventory		$30,000
	(To write off inventory)

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