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: Inventory, by Product Type Quantity Per Unit Cost Net Realizable Value Tools: Hammers 110 $ 4.40 $ 4.90 Saws 140 9.40 8.40 Screwdrivers 240 1.40 2.00 Paint products: 1-gallon cans 440 5.40 4.40 Paint brushes 110 3.40 3.90 Required: 1. 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. 2. 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.

Explanation / Answer

A INDIVIDUAL PRODUCT WISE Product Unit Cost NRV Book Value (cost, nrv whichever is lower) Hammers 110 $4.40 $4.90 $4.40 Saws 140 $9.40 $8.40 $8.40 Screwdrivers 240 $1.40 $2 $1.40 Paint products 440 $5.40 $4.40 $4.40 total $20.60 $19.70 $18.60 B.V as per individual product wise = $18.60 B PRODUCT TYPE WISE Product Type Product Unit Cost NRV Tools Hammers 110 $4.40 $4.90 Saws 140 $9.40 $8.40 Screwdrivers 240 $1.40 $2 TOTAL $15.20 $15.30 Paint Paint products 440 $5.40 $4.40 BOOK VALUE Cost NRV Book Value (cost, nrv whichever is lower) Tools $15.20 15.3 $15.20 Paint $5.40 4.4 4.4 TOTAL $20.60 $19.70 $19.60 B.V as per product type wise = $19.6 C TOTAL INVENTORY WISE Product Unit Cost NRV Hammers 110 $4.40 $4.90 Saws 140 $9.40 $8.40 Screwdrivers 240 $1.40 $2 Paint products 440 $5.40 $4.40 TOTAL $20.60 $19.70 Book Value (Cost, nrv whichever is lower)= $19.7 2 COST OF INVENTORY B.V TO BE RECORDED LOSS TO BE RECOGNISED INDIVIDUAL PRODUCT WISE $20.60 $18.60 $2.00 PRODUCT TYPE WISE $20.60 $19.60 $1.00 TOTAL INVENTORY WISE $20.60 $19.70 $0.90

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