Almaden Hardware Store sells two product categories, tools and paint products. I
ID: 2508157 • Letter: A
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 100 $ 4.50 $ 5.00 Saws 150 9.50 8.50 Screwdrivers 250 1.50 2.10 Paint products: 1-gallon cans 450 5.50 4.50 Paint brushes 100 3.50 4.00 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.
Explanation / Answer
Answer
cost
market
a. Individual
b. product
c. total market
Tools:
Hammers
450
500
450
500
500
Saws
1425
1275
1275
1275
1275
Screwdrivers
375
525
375
525
525
total tools:
2250
2300
2100
2300
2300
Paint products:
1-gallon cans
2475
2025
2025
2025
2025
paint brushes
350
400
350
400
400
total paint products:
2825
2425
2375
2425
2425
total
5075
4725
4475
4725
4725
(For A, individual pick the lower of cost or market for each item individually - some are at cost and some are at market - it depends on which is lower for each item. For b, product, pick the lower of cost or market for the entire group (tools or paint brushes), both groups have lower market values (2300 versus 2250 for tools and 2425 versus 2825 for paint products, so both groups have been set to market. For c, the total for market of 4725 is lower than the total for cost of 5075, so the entire inventory is set to market.
(a) Individual products $ 600 (this is 5075 – 4475)
(b) Product type $ 350 (this is 5075 – 4725)
(c) Total inventory $ 350 (this is 5075 – 4725)
cost
market
a. Individual
b. product
c. total market
Tools:
Hammers
450
500
450
500
500
Saws
1425
1275
1275
1275
1275
Screwdrivers
375
525
375
525
525
total tools:
2250
2300
2100
2300
2300
Paint products:
1-gallon cans
2475
2025
2025
2025
2025
paint brushes
350
400
350
400
400
total paint products:
2825
2425
2375
2425
2425
total
5075
4725
4475
4725
4725
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.