Tatum Company has four products in its inventory. Information about the December

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.

Explanation / Answer

As per this method, the inventory isvalued at cost or NRV WHICHEVER IS LOWER

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

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.