Question

Check my work The records of Loren Movers Ltd. contained the following inventory data: 20X1 20x2 Cost NRV Cost NRV Category 1 Item A $ 13,000 $10,360 $ 5,600 $ 3,040 Item B 54,200 47,600 18.200 15.720 44,200 52,300 54,600 65150 $ 111,400 $110,260 78.400 $83,910 Item C Category 2 Item D Item E Item F $ 18,900 23,600 50,800 $ 16,060 S 16,100 $ 12,920 5,500 5,800 100 50,800 61200 58,520 $93,300 $ 72,360 $ 83,100 $71540 Required: 1. Calculate two different amounts that could justifiably be recorded as the allowance to reduce inventory to lower of cost-or-NRV at the end of 20X1. a. Individual items b. Category < Prev 307 #1 Next >

Answer 1

Solution:

1)

a	Individual items	$30,180
b	Category	$22,080

Wokings: 20X1: Individual Items

Category	Item	Cost	NRV	Inventory Value
1	A	$13,000	$10,360	$10,360
	B	$54,200	$47,600	$47,600
	C	$44,200	$52,300	$44,200
2	D	$18,900	$16,060	$16,060
	E	$23,600	$5500	$5500
	F	$50,800	$50,800	$50,800
Total Inventory Value		$204,700		$174,520

Allowance to be recorded by individual items = Cost - NRV = $204,700-$174,520 =$30,180

20X1: By Category

Category	Item	Cost	NRV	Inventory Value
1	A	$13,000	$10,360
	B	$54,200	$47,600
	C	$44,200	$52,300
		$111,400	$110,260	$110,260
2	D	$18,900	$16,060
	E	$23,600	$5500
	F	$50,800	$50,800
		$93,300	$72,360	$72,360
Total Inventory Value		$204,700	$182,620	$182,620

Allowance to be recorded by category= Cost - NRV = $204,700-$182,620 =$22,080

b) workings: 2002: Individual items

Category	Item	Cost	NRV	Inventory Value
1	A	$5,600	$3040	$3040
	B	$18,200	$15,720	$15,720
	C	$54,600	$65,150	$54,600
2	D	$16,100	$12,920	$12,920
	E	$5800	$100	$100
	F	$61,200	$58,520	$58,520
Total Inventory Value		$161,500	$155,450	$144,900

Allowance to be recorded by individual items = Cost - NRV = $161,500-$144,900 =$16,600

2002: By Category

Category	Item	Cost	NRV	Inventory Value
1	A	$5,600	$3040
	B	$18,200	$15,720
	C	$54,600	$65,150
		$78,400	$83,910	$78,400
2	D	$16,100	$12,920
	E	$5800	$100
	F	$61,200	$58,520
		$83,100	$71,540	$71,540
Total Inventory Value		$161,500	$155,450	$149,940

Allowance to be recorded by category= Cost - NRV = $161,500-$149,940 =$11,560

2)

Transaction	General Journal	Debit	Credit
a	Inventory written down loss A/c	$30,180
	Allowance for NRV loss A/c		$30,180

Transaction	General Journal	Debit	Credit
b	Inventory written down loss A/c	$22,080
	Allowance for NRV loss A/c		$22,080

3)

Transaction	General Journal	Debit	Credit
a	Inventory written down loss A/c	$16,600
	Allowance for NRV loss A/c		$16,600

Transaction	General Journal	Debit	Credit
b	Inventory written down loss A/c	$11,560
	Allowance for NRV loss A/c		$11,560