Question

Decker Company has five products in its inventory. Information about the December 31, 2018, inventory follows.

Product		Quantity		Unit Cost				Unit Selling Price
A		1,100		$	12			$	18
B		900			17				20
C		700			3				8
D		300			7				6
E		700			16				15

The cost to sell for each product consists of a 10 percent sales commission.

Required:
1. Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products.
2a. Determine the carrying value of inventory at December 31, 2018, assuming the LCNRV rule is applied to the entire inventory.
2b. Assuming the inventory write-downs are usual business practice for Decker, record any necessary year-end adjusting entry.

Answer 1

Unit Selling Price Lower of Cost and Inventory Selli Product Quantity Unit Cost NRV Value Exepense 18 20 1,100 1.8 16.2 18 7.2 13,200 15,300 2,100 1,620 9,450 41,670 17 17 700 0.6 1.5 6 700 16 15 13.5 13.5 Unit Selling Selling Product antity Unit Cost NRV Total Cost Total NRV Price Exepense 13,200 15,300 2,100 2,100 11,200 43,900 43,900 18 20 1,100 16.2 17,820 16,200 5,040 1,620 9,450 50,130 1.8 17 7.2 5.4 13.5 700 0.6 1.5 700 16 15 Lower of Cost or NRV 2b Debit Credit Inventory Loss 2,230 Inventory ( 43,900-41690) (Recording Inventory Valuation for Case 1) No Journal entry is required for case 2a 2,230