Question

Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2021 year-end inventory is as follows:

Inventory, by Product Category	Quantity			Per Unit Cost				Net Realizable Value
Tools:
Hammers	120			$	5.50			$	6.00
Saws	250				10.50				9.50
Screwdrivers	350				2.50				3.10
Paint products:
1-gallon cans	550				6.50				5.50
Paint brushes	120				4.50				5.00

Required:
1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory.

	Lower of cost and NRV Net Realizable Value By Individual Products By Product Categories By Total Inventory Product Cost Tools:    Hammers Saws Screwdrivers Total tools Paint products: 1-gallon cans Paint brushes Total paint Total

2. Assuming inventory write-downs are common for Almaden, record any necessary year-end adjustment amount for each of the LCNRV applications in requirement 1.

	(a) Individual products (b) Product categories    (c) Total inventory

Answer 1

Lower of Cost or Market for the inventory applied separately to each item Per Unit Total Lower of Cost or NRV By By Product By total individual Categories inventory products Item Units Cost NRV Cost NRV 120 $ 5.50 250 $ 10.50 350 $ 2.50 $ $ $ 6.00 9.50 3.10 $ $ $ $ Tools : Hammers Saws Screwdrivers Total Tools Paint Products : 1-gallon cans Paint brushes Total Pain 660 2,625 875 4,160 $ $ $ $ 720 2,375 1,085 4,180 $ $ $ 660 2,375 875 $ 4,160 550 $ 120 $ 6.50 4.50 $ $ 5.50 5.00 $ $ $ 3,575$ 540 $ 4,115 $ 3,025 $ 600 $ 3,625 3,025 540 $ 3,625 Total $ 8,275 $ 7,805 $ 7,475 $ 7,785 $ 7,805

2) Amount to be adjusted each category wise as follows Individual Product Total Products Categories Inventory Total Cost of Inventory $ 8,275$ 8,275 $ 8,275 Less : LCNRV $ 7,475 $ 7,785 $ 7,805 Amount to be adjusted $ 800 $ 490 $ 470