Question

12.

Home Stop sells two product categories, furniture and accessories. Information pertaining to its 2021 year-end inventory is as follows:

Inventory, by Product Category Furniture: Chairs Per Unit Quantity Market Cost $35 41 20 Desks 60 83 68 Tables 70 94 102 Accessories: Rugs Lamps 30 70 58 70 32 28 Required: 1. Determine the carrying value of inventory at year-end, assuming the lower of cost or market (LCM) rule is applied to (a) individual products, (b) product categories, and (c) total inventory. 2. Assuming inventory write-downs are common for Home Stop, record any necessary year-end adjustment amount for each of the LCM applications in requirement 1.

Answer 1

Part-1
Product		Qty	Cost	NRV	Cost	NRV	Lower Cost and NRV
							by Individual Product	by Product Type	By Total
Furniture
Chairs		20	$35.00	$41.00	$700.00	$820.00	$700.00
Desks		60	$83.00	$68.00	$4,980.00	$4,080.00	$4,080.00
Tables		70	$94.00	$102.00	$6,580.00	$7,140.00	$6,580.00
Total					$12,260.00	$12,040.00		$12,040.00
Accessories
Rugs		30	$70.00	$58.00	$2,100.00	$1,740.00	$1,740.00
Lamps		70	$32.00	$28.00	$2,240.00	$1,960.00	$1,960.00
Total					$4,340.00	$3,700.00		$3,700.00
Grand Total					$16,600.00	$15,740.00	$15,060.00	$15,740.00	$15,740.00

Part-2
Application of valuation method		loss amount
a) individual products (16600-15060)		$1,540.00
b) product type (16600-15740)		$860.00
c) Total inventory (16600-15740)		$860.00