Question

Decker Company has five products in its inventory. Information about the December 31, 2021, inventory follows.

Product	Quantity	Unit Cost	Unit Selling Price
A	1,050	$29	$36
B	850	35	36
C	700	3	12
D	300	11	10
E	700	32	30

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 .

Answer 1

Required 1 :
Product	Units	Cost [ Units * Unit cost ]	NRV [ ( Units * Unit selling price ) * ( 1 - 10% commission ) ]	Inventory value [ Lower of cost or NRV ]
A	1050	$                  30,450	$        34,020	$        30,450
B	850	$                  29,750	$        27,540	$        27,540
C	700	$                    2,100	$          7,560	$          2,100
D	300	$                    3,300	$          2,700	$          2,700
E	700	$                  22,400	$        18,900	$        18,900
		$                  88,000	$        90,720	$        81,690

Required 2 :
Inventory carrying value [ Lower of total cost or total NRV ]	$                             88,000

Required 3 :
Event	General Journal	Debit	Credit
1	No journal entry required