Question

Check my work Exercise 9-6 (Algo) Lower of cost or market (LO9-1) Tatum Company has four products in its inventory. Information about the December 31, 2021, inventory is as follows: points 02:09:41 Product Total Cost 101 $146,000 102 108,600 103 72,300 104 36, 700 Total Replacement Cost $ 133,400 102,500 48,200 34,300 Total Net Realizable Value $121,200 132,700 60,800 61,500 eBook The normal profit is 35% of total cost. Print Reference Required: 1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products. 2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry. Complete this question by entering your answers in the tabs below. Required Required Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or market (LCM) rule is applied to individual products. NRY - NP Market Inventory Value Product Total Cost Replacement cost NRV 101 102 103 104 Totals $ 0 Required 1 $ 0 Required 2 >

Answer 1

Solution 1:

Computation of carrying value of inventory at December 31, 2021
Product	Total Cost	Replacement cost (a)	NRV (b)	NRV-NP [NRV- Cost*35%] (c )	Market (Middle Value of a,b,c)	Inventory value (Lower of Cost or Market)
101	146000	133400	121200	70100	121200	121200
102	108600	102500	132700	94690	102500	102500
103	72300	48200	60800	35495	48200	48200
104	36700	34300	61500	48655	48655	36700
Totals	363600					308600

Solution 2:

Transaction	General Journal	Debit	Credit
1	Cost of goods sold (363600- 308600)	55000
	Inventory		55000