Question

Tatum Company has four products in its inventory. Information about the December 31, 2016, inventory is as follows:

Product	Total Cost			Total Net Realizable Value
101	$	136,000	$	108,000
102		99,000		118,000
103		68,000		58,000
104		38,000		58,000

  

Required:
1.	Determine the book value of inventory at December 31, 2016, assuming the lower of cost and net realizable value rule is applied to individual products. product-cost-NRV-Inventory Value 101 102 103 104

      

2.	Assuming that Tatum reports an inventory write-down as a line item in the income statement, determine the amount of the loss.

       

Answer 1

Answer 1 Value of Material as per LCNRV

Product	Cost($)	NRV($)	Inventory Valuation($)
101	136,000	108,000	108000
102	99,000	118,000	99000
103	68,000	58,000	58000
104	38,000	58,000	38000

Answer 2 The amount of loss due to write down = $38000

Above answers are calculated as following

Product	Cost($)	NRV($)	Inventory Valuation($)
101	136,000	108,000	108000
102	99,000	118,000	99000
103	68,000	58,000	58000
104	38,000	58,000	38000
	341,000		303000
Loss due to write down = $341000-$303000 = $38000