Question

Decker Company has five products in its inventory. Information about the December 31, 2021, inventory follows.

Product		Quantity		Unit Cost				Unit Selling Price
A		1,300		$	26			$	32
B		1,100			31				34
C		1,000			4				8
D		600			7				6
E		1,000			30				29

The cost to sell for each product consists of a 10 percent sales commission.

Required:
1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products.
2. Determine the carrying value of inventory at December 31, 2021, assuming the LCNRV rule is applied to the entire inventory.
3. Assuming inventory write-downs are common for Decker, record any necessary year-end adjusting entry based on the amount calculated in requirement 2.

Answer 1

									(2)	(1)
				Unit Selling	Sales				Entire	Individual
Product		Quantity	Unit Cost	Price	Commission	NRV per unit	Costs	NRV	Inventory	Items
A		1300	$   26.00	$        32.00	$              3.20	$           28.80	$    33,800.00	$    37,440.00		$    33,800.00
B		1100	$   31.00	$        34.00	$              3.40	$           30.60	$    34,100.00	$    33,660.00		$    33,660.00
C		1000	$      4.00	$          8.00	$              0.80	$              7.20	$      4,000.00	$      7,200.00		$      4,000.00
D		600	$      7.00	$          6.00	$              0.60	$              5.40	$      4,200.00	$      3,240.00		$      3,240.00
E		1000	$   30.00	$        29.00	$              2.90	$           26.10	$    30,000.00	$    26,100.00		$    26,100.00
							$ 106,100.00	$ 107,640.00	$ 106,100.00	$ 100,800.00

3)	To adjust inventory cost to market, entry to be passed is:
	Particulars			Debit	Credit
	Cost of Goods Sold			$   5,300.00
	To Merchandise Inventory				$   5,300.00
	($ 106100 - $ 100800)