Question

Forester Company has five products in its inventory. Information about the December 31, 2018, inventory follows.

Product		Quantity		Unit Cost				Unit Replacement Cost				Unit Selling Price
A		900		$	16			$	18			$	22
B		1,000			21				17				24
C		900			9				8				14
D		1,000			13				10				12
E		900			20				18				19

The cost to sell for each product consists of a 10 percent sales commission. The normal profit percentage for each product is 40 percent of the selling price.

Required:
1. Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or market (LCM) rule is applied to individual products.
2a. Determine the carrying value of inventory at December 31, 2018, assuming the LCM rule is applied to the entire inventory.
2b. Assuming inventory write-downs are usual business practice for Forester, record any necessary year-end adjusting entry.

Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or market (LCM) rule is applied to individual products. (Do not round intermediate calculations.)

	Product (units) RC NRV NRV-NP Market Cost Inventory Value A (900) B (1000) C (900) D (1000) E (900) Total $0 $0 $0

Determine the carrying value of inventory at December 31, 2018, assuming the LCM rule is applied to the entire inventory. (Do not round intermediate calculations.)

	Inventory carrying value

Assuming the inventory write-downs are usual business practice for Forester, record any necessary year-end adjusting entry. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record any necessary year-end adjusting entry assuming that inventory write-downs are common for Forester Company.

Note: Enter debits before credits.

	Event General Journal Debit Credit 1

Answer 1

						40% of Sale
	Product	Quantity	Unit Cost	Unit Replacement Cost	Unit Selling Price	Profit PU	Unit Cost*Qty
	A	900	16.00	18.00	22.00	8.80	14400
	B	1000	21.00	17.00	24.00	9.60	21000
	C	900	9.00	8.00	14.00	5.60	8100
	D	1000	13.00	10.00	12.00	4.80	13000
	E	900	20.00	18.00	19.00	7.60	18000
							74500
A			Ceiling	Floor
	Product (units)	RC	NRV	NRV-NP	Market	Cost	Inventory Value at Cost	Inventory Value at Market	Inventory Value	Used
	A (900)	18.00	19.80	11.00	18.00	16.00	14,400	16200	14,400	Cost
	B (1000)	17.00	21.60	12.00	17.00	21.00	21,000	17000	17,000	Market
	C (900)	8.00	12.60	7.00	8.00	9.00	8,100	7200	7,200	Market
	D (1000)	10.00	10.80	6.00	10.00	13.00	13,000	10000	10,000	Market
	E (900)	18.00	17.10	9.50	17.10	20.00	18,000	15390	15,390	Market
	Total						74,500	65,790	63,990
B		Inventory Value at Cost	Inventory Value at Market
	Total Level	74,500	65,790
	Minimum Value	65,790
C	Entry in Case of Individual Valuation:
	Loss on LCM Adjustment Account Dr.	10,510
	To Finished Goods Inventory		10,510
	Entry in Case of Total Level Valuation:
	Loss on LCM Adjustment Account Dr.	8,710
	To Finished Goods Inventory		8,710