Question

Tatum Company has four products in its inventory. Information about the December 31, 2018, inventory is as follows: Product Total Cost Total Net Realizable Value 101 $ 154,000 $ 117,000 102 111,000 127,000 103 77,000 67,000 104 47,000 67,000 Required: 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

Requirement 1
Carrying value of inventory at december 31,2018 under LCNRV Method
As per this method, the inventory isvalued at cost or NRV WHICHEVER IS LOWER
Product	Cost	NRV	Inventory Value
101	1,54,000	1,17,000	1,17,000
102	1,11,000	1,27,000	1,11,000
103	77,000	67,000	67,000
104	47,000	67,000	47,000
	3,89,000		3,42,000
Requirement 2
Loss from write-down of inventory			-47,000
Cost of goods Sold Dr		47000
Merchandise inventory Cr			47000
To adjust inventory to LCNRV