Question

A local Chevrolet dealership carries the following types of vehicles

		Unit	Unit
Inventory Items	Quantity	Cost	NRV
Vans	3	$18,000	$16,000
Trucks	6	16,200	15,200
2-door sedans	2	11,200	13,200
4-door sedans	7	15,200	18,200
Sports cars	3	28,000	31,600
SUVs	5	26,400	19,000

Because of recent Increases In gasoline prices, the car dealership has noticed a reduced demand for its SUVs, vans, and trucks.

2. Determine whether each Inventory Item would be reported at cost or net realizable value (NRV). Enter the Cost per Unit for the "Lower of Cost and net realizable value" and then multiply the quantity of each Inventory Item by the appropriate cost or NRV amount and enter It In the Total column.

3. Prepare necessary entry to write down Inventory from cost to net realizable value. (If no entry is required for a transaction/event select "No Journal Entry Required" In the first account field.) 

Answer 1

	Inventory Items	Cost or NRV	Lower of cost and NRV per unit	Total
	Vans	NRV	$16,000	$48,000
	Trucks	NRV	$15,200	$91,200
	2-door sedans	Cost	$11,200	$22,400
	4-door sedans	Cost	$15,200	$106,400
	Sports cars	Cost	$28,000	$54,000
	SUVs	NRV	$19,000	$95,000
	Total			$417,000
	Since there is a decline in the value of the SUVs, Vans and Trucks, hence we will write down the cost
	of these 3 to NRV
	SUVs = (26,400 - 19,000)*5 = $37,000
	Vans = (18,000 - 16,000)*3 = $6,000
	Trucks = (16,200 - 15,200)*6 = $6,000
	Journal entry	Debit	Credit
	Inventory Write down-SUVs	$37,000
	Inventory Write down-Vans	$6,000
	Inventory Write down-Trucks	$6,000
	Inventory-SUVs		$37,000
	Inventory-Vans		$6,000
	Inventory-Trucks		$6,000