Decker Company has five products in its inventory. Information
about the December 31, 2021, inventory follows.
Product | Quantity | Unit Cost |
Unit Selling Price |
||||||||||
A | 1,100 | $ | 30 | $ | 36 | ||||||||
B | 900 | 35 | 38 | ||||||||||
C | 800 | 4 | 12 | ||||||||||
D | 400 | 11 | 10 | ||||||||||
E | 800 | 34 | 33 | ||||||||||
The cost to sell for each product consists of a 10 percent sales
commission.
Required:
1. Determine the carrying value of inventory at
December 31, 2021, assuming the lower of cost or net realizable
value (LCNRV) rule is applied to individual products.
2. Determine the carrying value of inventory at
December 31, 2021, assuming the LCNRV rule is applied to the entire
inventory.
3. Assuming inventory write-downs are common for
Decker, record any necessary year-end adjusting entry based on the
amount calculated in requirement 2.
Required 1 : | ||||
Product | Units | Cost [ Units * Unit cost ] | NRV [ ( Units * Unit selling price ) * ( 1 - 10% commission ) ] | Inventory value [ Lower of cost or NRV ] |
A | 1100 | $ 33,000 | $ 35,640 | $ 33,000 |
B | 900 | $ 31,500 | $ 30,780 | $ 30,780 |
C | 800 | $ 3,200 | $ 8,640 | $ 3,200 |
D | 400 | $ 4,400 | $ 3,600 | $ 3,600 |
E | 800 | $ 27,200 | $ 23,760 | $ 23,760 |
$ 99,300 | $ 102,420 | $ 94,340 |
Required 2 : | |
Inventory carrying value [ Lower of total cost or total NRV ] | $ 99,300 |
Required 3 : | |||
Event | General Journal | Debit | Credit |
1 | No journal entry required |
Decker Company has five products in its inventory. Information about the December 31, 2021, inventory follows....
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