Almaden Hardware Store sells two distinct types of products, tools and paint pro

Question

Almaden Hardware Store sells two distinct types of products, tools and paint products. Information pertaining to its 2016 year-end inventory is as follows:

Determine the book value of inventory at year-end, assuming the lower of cost and net realizable value rule is applied to (a) individual products, (b) product type, and (c) total inventory.

Assuming that the company reports an inventory write-down as a line item in the income statement, for each of the lower of cost and net realizable value applications determine the amount of the loss.

Almaden Hardware Store sells two distinct types of products, tools and paint products. Information pertaining to its 2016 year-end inventory is as follows:

Explanation / Answer

  Inventory Quantity Per Unit Net Realizable Value Inventory Valuation:   by Product Type A On Individual Products (Cost or NRV Whichever is lower)   Tools: Total Cost Total NRV        Hammers 120 5.8 6.3 (Qty*Cost) (Qty*NRV) As per Rule Factor Used        Saws 280 10.8 9.8        Hammers 696 756 696 Cost        Screwdrivers 380 2.8 3.4        Saws 3024 2744 2744 NRV   Paint products:        Screwdrivers 1064 1292 1064 Cost        1-gallon cans 580 6.8 5.8        1-gallon cans 3944 3364 3364 NRV        Paint brushes 120 4.8 5.3        Paint brushes 576 636 576 Cost Total Value 8444 B On Products Type (Cost or NRV Whichever is lower) Total Cost Total NRV (Qty*Cost) (Qty*NRV) As per Rule Factor Used   Tools(Taken from Product breakup above) 4784 4792 4784 Cost   Paint products(Taken from Product breakup above) 4520 4000 4000 NRV Total Value 8784 C On Inventory Level Type (Cost or NRV Whichever is lower) Total Cost Total NRV (Qty*Cost) (Qty*NRV) As per Rule Factor Used Total Inventory 9304 8792 8792 NRV (Total taken from A) Total Value 8792 2 Company uses Inventory write down as a line item: Total Cost Total NRV (Qty*Cost) (Qty*NRV) As per Rule Factor Used        Hammers 696 756 696 Cost        Saws 3024 2744 2744 NRV        Screwdrivers 1064 1292 1064 Cost        1-gallon cans 3944 3364 3364 NRV        Paint brushes 576 636 576 Cost Total Value 8444 Total Book Value of Inventory(Basis Cost) 9304 Valuation (Cost or NRV, Whichever is lower) 8444 Total Loss to be Recorded 860 Breakup of Loss to be recorded at Line item level: Total Cost Valuation Loss        Hammers 696 696 0        Saws 3024 2744 280        Screwdrivers 1064 1064 0        1-gallon cans 3944 3364 580        Paint brushes 576 576 0 Total Loss 860

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