Question

Tatum Company has four products in its inventory. Information about the December 31, 2018, inventory is as follows:

Product	Total Cost			Total Net Realizable Value
101	$	146,000		$	113,000
102		108,000			123,000
103		73,000			63,000
104		43,000			63,000

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.

	Product Cost NRV Inventory Value 101 102 103 104

2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry.

Journal entry worksheet

• Record any necessary year-end adjusting entry assuming that inventory write-downs are common for Tatum Company.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit 1

Answer 1

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.

	Product Cost NRV Inventory Value 101 146000 113000 113000 102 108000 123000 108000 103 73000 63000 63000 104 43000 63000 43000 Total 370000 327000

2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry.

• Record any necessary year-end adjusting entry assuming that inventory write-downs are common for Tatum Company.

	Transaction General Journal Debit Credit 1 Cost of goods sold 43000 Merchandise inventory 43000