A company reports inventory using the lower of cost and net realizable value. Below is information...
A company reports inventory using the lower of cost and net realizable value. Below is information related to its year-end inventory.
a. Calculate ending inventory under the lower of cost and net realizable value
b. Prepare the necessary adjusting entry to inventory (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Homework Answers
| Inventory | Cost | NRV | Lower of cost and NRV | Quantity | Ending inventory at Lower of cost and NRV | Total cost of inventory |
| Item A | $24 | $29 | $24 | 120 | 24 x 120 = $2,880 | 24 x 120 = $2,880 |
| Item B | $29 | $19 | $19 | 40 | 19 x 40 = $760 | 29 x 40 = $1,160 |
| $3,640 | $4,040 |
b)
Loss on write down of inventory = Total cost of inventory - Ending inventory at Lower of cost and NRV
= 4,040 - 3,640
= $400
Journal
|
Date |
Account title |
Debit |
Credit |
|
1 |
Loss on write down of inventory |
400 |
|
|
Inventory |
400 |
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