Question

Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2018 year-end inventory is as follows:

Inventory, by Product Category	Quantity			Per Unit Cost				Net Realizable Value
Tools:
Hammers	110			$	5.70			$	6.20
Saws	270				10.70				9.70
Screwdrivers	370				2.70				3.30
Paint products:
1-gallon cans	570				6.70				5.70
Paint brushes	110				4.70				5.20

Required:
1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory.
2. Assuming that the company reports an inventory write-down as a line item in the income statement, for each of the LCNRV applications determine the amount of the loss.

Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory.

	Lower of cost and NRV Net By By Realizable Individual Product By Total Product Cost Value Products Type Inventory Tools: Hammers Saws Screwdrivers Total tools $0 $0 Paint products: 1-gallon cans Paint brushes Total paint $0 $0 Total $0 $0 $0 $0

Assuming that the company reports an inventory write-down as a line item in the income statement, for each of the LCNRV applications determine the amount of the loss.

	(a) Individual products (b) Product categories (c) Total inventory

Answer 1

	Inventory,	Quantity			Per Unit				Net Realizable Value
	by Product Category				Cost
	Tools:
	Hammers	110			$	5.7		627	$	6.2	682
	Saws	270				10.7		2889		9.7	2619
	Screwdrivers	370				2.7		999		3.3	1221
	Paint products:										0
	1-gallon cans	570				6.7		3819		5.7	3249
	Paint brushes	110				4.7		517		5.2	572
				Lower of cost and NRV
			Net	By	By
			Realizable	Individual	Product	By Total
	Product	Cost	Value	Products	Type	Inventory
	Tools:
	Hammers	627	682	627
	Saws	2889	2619	2619
	Screwdrivers	999	1221	999
	Total tools	$4,515	$4,522	$4,245	$4,515
	Paint products:
	1-gallon cans	3819	3249	3249
	Paint brushes	517	572	517
	Total paint	$4,336	$3,821	$3,766	$3,821
	Total	$8,851	$8,343	$8,011	$8,336	$8,343
	AMOUNT OF LOSS
(a)	Individual products	$840	(8851-8011)
(b)	Product categories	$515	(8851-8336)
(c)	Total inventory	$508	(8851-8343)