Question

Decker Company has five products in its inventory. Information about the December 31, 2018, inventory follows.

Product	Quantity	Unit Cost	Unit Selling Price
A	1,300	$16	$22
B	1,100	21	24
C	900	3	8
D	500	7	6
B	900	20	19

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, 2018, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products.

2a. Determine the carrying value of inventory at December 31, 2018, assuming the LCNRV rule is applied to the entire inventory.

2b. Assuming the inventory write-downs are usual business practices for Decker, record any necessary year-end adjusting entry.

Answer 1

1.

	QTY	UNIT COST	SALE COMMISSION	UNIT COST EXCLUDING SALE COMMISSION	UNIT SELLING PRICE	LOWER OF COST OR NRV	INVENTORY VALUE
A	1,300.00	16.00	2.20	13.80	22.00	13.80	17,940.00
B	1,100.00	21.00	2.40	18.60	24.00	18.60	20,460.00
C	900.00	3.00	0.80	2.20	8.00	2.20	1,980.00
D	500.00	7.00	0.60	6.40	6.00	6.00	3,000.00
E	900.00	20.00	1.90	18.10	19.00	18.10	16,290.00
							59,670.00

2a.

	QTY	UNIT COST	SALE COMMISSION	UNIT COST EXCLUDING SALE COMMISSION	UNIT SELLING PRICE	INVENTORY VALUE AT COST	INVENTORY VALUE AT NRV	INVENTORY VALUE-LOWER OF COST OR NRV
A	1,300.00	16.00	2.20	13.80	22.00	17,940.00	28,600.00
B	1,100.00	21.00	2.40	18.60	24.00	20,460.00	26,400.00
C	900.00	3.00	0.80	2.20	8.00	1,980.00	7,200.00
D	500.00	7.00	0.60	6.40	6.00	3,200.00	3,000.00
E	900.00	20.00	1.90	18.10	19.00	16,290.00	17,100.00
						59,870.00	82,300.00	59,870.00

  

2b. Cost of Goods Sold Dr [(6.40-6)*500] $200

To Inventory $200

(Being inventory written down of product D)