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Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2018...

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Accounting

Almaden Hardware Store sells two product categories, tools andpaint products. Information pertaining to its 2018 year-endinventory is as follows:

Inventory,
by Product Category		QuantityPer Unit
Cost		Net Realizable Value
Tools:
Hammers100$5.90$6.40
Saws29010.909.90
Screwdrivers3902.903.50
Paint products:
1-gallon cans5906.905.90
Paint brushes1004.905.40


Required:
1. Determine the carrying value of inventory atyear-end, assuming the lower of cost or net realizable value(LCNRV) rule is applied to (a) individual products, (b) productcategories, and (c) total inventory.
2. Assuming that the company reports an inventorywrite-down as a line item in the income statement, for each of theLCNRV applications determine the amount of the loss.

Answer & Explanation Solved by verified expert
3.7 Ratings (308 Votes)

Solution 1:

Almaden Hardware store
Computation of Carrying Value of Ending Inventory on LCM/NRV Basis
Product Quantity Cost Net Realizable Value Lower of Cost and NRV
Cost per unit Total Cost Per unit Total By Individual Products By Product Categories By Total Inventory
Tools:
Hammers 100 $5.90 $590.00 $6.40 $640.00 $590.00
Saws 290 $10.90 $3,161.00 $9.90 $2,871.00 $2,871.00
Screwdrivers 390 $2.90 $1,131.00 $3.50 $1,365.00 $1,131.00
Total Tool (A) $4,882.00 $4,876.00 $4,592.00 $4,876.00
Paint Products:
1-Gallon cans 590 $6.90 $4,071.00 $5.90 $3,481.00 $3,481.00
Paint Brushes 100 $4.90 $490.00 $5.40 $540.00 $490.00
Total Paint (B) $4,561.00 $4,021.00 $3,971.00 $4,021.00
Total (A+B) $9,443.00 $8,897.00 $8,563.00 $8,897.00 $8,897.00

Solution 2:

Computation of amount of Loss
By Individual Product ($9443-$8563) 880.00
By Product Categories ($9443-$8897) 546.00
By total Inventory ($9443-$8897) 546.00
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