Almaden Hardware Store sells two product categories, tools and paint products. I
ID: 2537076 • 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.
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.
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.
Inventory,by Product Category Quantity Per Unit
Cost Net Realizable Value Tools: Hammers 110 $ 5.70 $ 6.20 Saws 270 10.70 9.70 Screwdrivers 370 2.70 3.30 Paint products: 1-gallon cans 570 6.70 5.70 Paint brushes 110 4.70 5.20
Explanation / Answer
Inventory, Quantity Per Unit Net Realizable Value by Product Category Cost Tools: Hammers 110 $ 5.7 627 $ 6.2 682 Saws 270 10.7 2889 9.7 2619 Screwdrivers 370 2.7 999 3.3 1221 Paint products: 0 1-gallon cans 570 6.7 3819 5.7 3249 Paint brushes 110 4.7 517 5.2 572 Lower of cost and NRV Net By By Realizable Individual Product By Total Product Cost Value Products Type Inventory Tools: Hammers 627 682 627 Saws 2889 2619 2619 Screwdrivers 999 1221 999 Total tools $4,515 $4,522 $4,245 $4,515 Paint products: 1-gallon cans 3819 3249 3249 Paint brushes 517 572 517 Total paint $4,336 $3,821 $3,766 $3,821 Total $8,851 $8,343 $8,011 $8,336 $8,343 AMOUNT OF LOSS (a) Individual products $840 (8851-8011) (b) Product categories $515 (8851-8336) (c) Total inventory $508 (8851-8343)
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