Question

Decker Company has five products in its inventory. Information about the December 31, 2021, inventory follows. Unit Selling Price $24 Unit Cost $ 18 23 3 6 22 Product Quantity 1,400 1,200 1,000 600 1,000 26 7 5 21 The cost to sell for each product consists of a 15 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

1.

Product	Units	Cost (Units * Unit cost)	NRV (Units * Selling Price ) x 85%	Inventory value
A	1400	$   25,200.00	$    28,560.00	$ 25,200.00
B	1200	$   27,600.00	$    26,520.00	$ 26,520.00
C	1000	$     3,000.00	$      5,950.00	$    3,000.00
D	600	$     3,600.00	$      2,550.00	$    2,550.00
E	1000	$   22,000.00	$    17,850.00	$ 17,850.00
Total		$   81,400.00	$    81,430.00	$ 75,120.00

2.

Inventory carrying value = $75120

3.

Date	Account Title	debit	credit
	Cost of goods sold (81400-75120)	$     6,280.00
	Inventory		$      6,280.00
	(To record adjusting entry)