Almaden Hardware Store sells two product categories, tools and paint products. I

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

1. Applied to Individual Product Product Qty Cost per unit Total cost NRV Total NRV Valuation Hammers 100 4.5 450 5 500 450 Saws 150 9.5 1425 8.5 1275 1275 Screw drivers 250 1.5 375 2.1 525 375 paint Product 450 5.5 2475 4.5 2025 2025 Paint brushes 100 3.5 350 4 400 350 Total cost 5075 Total valuation 4475 Hence, Ending inventory valued at $ 4475 Loss on valuation of inventory = Cost price- valuation price = 5075-4475 =$ 600 2. Applied to Product categories Product Qty Cost per unit Total cost NRV Total NRV Hammers 100 4.5 450 5 500 Saws 150 9.5 1425 8.5 1275 Screw drivers 250 1.5 375 2.1 525 Total cost 2250 Total NRV 2300 paint Product 450 5.5 2475 4.5 2025 Paint brushes 100 3.5 350 4 400 Total cost 2825 Total NRV 2425 Valuation of ending inventory Hardware(2250 or 2300 , less)   $ 2250 Paint products (2825 or 2425, less) $ 2425 Total Ending inventory              $ 4675 Loss on valution = Total cost - valuation = 5075-4675 = $ 400 3. Applied to Total Inventory Product Qty Cost per unit Total cost NRV Total NRV Hammers 100 4.5 450 5 500 Saws 150 9.5 1425 8.5 1275 Screw drivers 250 1.5 375 2.1 525 paint Product 450 5.5 2475 4.5 2025 Paint brushes 100 3.5 350 4 400 Total cost 5075 Total NRV 4725 Valuation of Ending inventory (Cost or NRV, less)         $ 4725 Loss on valuation = Total cost - Valuation =5075 -4725 = $ 350

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

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