Question

A company reports inventory using the lower of cost and net realizable value. Below is information related to its year-end inventory:
  

Inventory	Quantity	Cost			NRV
Unit A	15	$	38		$	40
Unit B	23		41			38
Unit C	17		29			33
Unit D	20		15			14

  
a. Calculate ending inventory under the lower of cost and net realizable value.

Ending Inventory:

b. Prepare the necessary adjusting entry to inventory as a journal entry worksheet. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

	D	A	B	C= A or B, Whichever is Lower	C*D		(A*D)
Inventory	Qty	Cost	NRV	Valuation PU	Total Valuation		Existing Valuation at Cost
UnitA	15	38.00	40.00	38.00	570.00		570.00
UnitB	23	41.00	38.00	38.00	874.00		943.00
UnitC	17	29.00	33.00	29.00	493.00		493.00
UnitD	20	15.00	14.00	14.00	280.00		300.00
				Total Ending Inventory	2,217.00		2,306.00
						Loss	89.00
	Adjustment Entry:
	Inventory Adjustment-Expense Account Dr.	89.00
	To Inventory Account		89.00