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.

	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

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.

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

Answer 1

1		Cost	Net Realizable Value	By Individual Products	By Product Type	By Total Inventory
	Product
	Tools:
	Hammers	$        627	$                   682	$           627
	Saws	$    2,889	$               2,619	$       2,619
	Screwdrivers	$        999	$               1,221	$           999
	Total tools	$    4,515	$               4,522		$     4,515
	Paint Products:
	1 - gallon cans	$    3,819	$               3,249	$       3,249
	Paint brushes	$        517	$                   572	$           517
	Total paint	$    4,336	$               3,821		$     3,821
	Total	$    8,851	$               8,343	$       8,011	$     8,336	$       8,343
2
(a)	Individual Products	=	$                   840
(b)	Product Categories	=	$                   515
(c)	Total Inventory	=	$                   508
	Workings:
		Quantity	Per unit cost	Cost	Net Realizable Value per unit	Net Realizable Value
		(i)	(ii)	(i) X (ii)	(iii)	(i) X (iii)
	Tools:
	Hammers	110	$                 5.70	$           627	$       6.20	$           682
	Saws	270	$               10.70	$       2,889	$       9.70	$       2,619
	Screwdrivers	370	$                 2.70	$           999	$       3.30	$       1,221
	1 - gallon cans	570	$                 6.70	$       3,819	$       5.70	$       3,249
	Paint brushes	110	$                 4.70	$           517	$       5.20	$           572
2
(a)	Individual Products	=	$8851 - $8011	=	$        840
(b)	Product Categories	=	$8851 - $8336	=	$        515
(c)	Total Inventory	=	$8851 - $8343	=	$        508