Almaden Hardware Store sells two distinct types of products, tools and paint pro
ID: 2345759 • Letter: A
Question
Almaden Hardware Store sells two distinct types of products, tools and paint products. Information pertaining to its 2011 year-end inventory is as follows:Inventory,
by Product Type Quantity Per Unit Cost Designated
Market
Tools:
Hammers 100 $ 5.00 $ 5.70
Saws 200 10.00 8.20
Screwdrivers 350 2.10 2.60
Paint products:
1-gallon cans 500 6.40 5.00
Paint brushes 100 3.10 4.50
(1) Determine the balance sheet inventory carrying value at year-end, assuming the LCM rule is applied to (a) individual products, (b) product type, and (c) total inventory. (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)
product cost designated (a) by individual (b) by product (c) by total
market value products type inventory
tools:
-hammers $ $ $
-saws $ $ $
-screwdrivers $ $ $
-total tools $ $ $
paint products:
-1 gallons cans $ $ $
-paint brushes $ $ $
-total paint $ $ $
-total $ $ $ $ $
(2) Assuming that the company recognizes an inventory write-down as a separate income statement item, for each of the LCM applications determine the amount of the loss. (Omit the "$" sign in your response.)
(a) Individual products $
(b) Product type $
(c) Total inventory $
Explanation / Answer
cost
market
a. Individual
b. product
c. total market
Tools:
Hammers
500
570
500
570
570
Saws
2000
1640
1640
1640
1640
Screwdrivers
735
910
735
910
910
total tools:
3235
3120
2875
3120
3120
Paint products:
1-gallon cans
3200
2500
2500
2500
2500
paint brushes
310
450
310
450
450
total paint products:
3510
2950
2810
2950
2950
total
6745
6070
5685
6070
6070
(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 (3120 versus 3235 for tools and 2950 versus 3510 for paint products, so both groups have been set to market. For c, the total for market of 6070 is lower than the total for cost of 6745, so the entire inventory is set to market.
(a) Individual products $ 1060 (this is 6745 – 5685)
(b) Product type $ 675 (this is 6745 – 6070)
(c) Total inventory $ 675 (this is 6745 – 6070)
cost
market
a. Individual
b. product
c. total market
Tools:
Hammers
500
570
500
570
570
Saws
2000
1640
1640
1640
1640
Screwdrivers
735
910
735
910
910
total tools:
3235
3120
2875
3120
3120
Paint products:
1-gallon cans
3200
2500
2500
2500
2500
paint brushes
310
450
310
450
450
total paint products:
3510
2950
2810
2950
2950
total
6745
6070
5685
6070
6070
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