Almaden Hardware Store sells two product categories, tools and paint products. I
ID: 2515755 • 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:
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.
(a)Individual products
(b)Product categories
(c)Total inventory
Inventory,by Product Category Quantity Per Unit
Cost Net Realizable Value Tools: Hammers 120 $ 5.20 $ 5.70 Saws 220 10.20 9.20 Screwdrivers 320 2.20 2.80 Paint products: 1-gallon cans 520 6.20 5.20 Paint brushes 120 4.20 4.70
Explanation / Answer
Req 1: By Ind. By Product By Total Product Cost NRV Product Type Inventory Tools: Hammer 624 684 624 Saws 2244 2024 2024 Screwdrivers 704 896 704 Total Tools 3572 3604 3572 Paint Products: 1-Gallon Cans 3224 2704 2704 Paint Brushes 504 564 504 Total Paint 3728 3268 3268 Total 7300 6872 6560 6840 6872 Req 2: WRITE DOWNS By Individual: 740 (7300-6560) By product type: 460 (7300-6840) By Total Inventory: 428 (7300-6872)
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