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Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2021 year-end inventory is as follows:Inventory,by Product Quantity Per Unit Net Realizable ValueCategory Cost Tools: Hammers 110 $ 4.10 $4.60 Saws 110 9.10 8.10 Screwdrivers 210 1.10 1.70 Paint products: 1-gallon cans 410 5.10 4.10 Paint brushes 110 3.10 3.60 Required:1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory.2. Assuming inventory write-downs are common for Almaden, record any necessary year-end adjustment amount for each of the LCNRV applications in requirement 1.

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Answer:

Product category        units           cost          NRV   year-end inventory

Tools:

  • Hammers             110            $4.10        $4.60            $451
  • Saws                    110            $9.10         $8.10            $891
  • Screwdrivers       210            $1.10         $1.70            $231

Paint products:

  • 1-gallon cans       410            $5.10        $4.10          $1,681
  • Paint brushes      110             $3.10       $3.60            $341

1) carrying value of year-end inventory:

Tools:                        

  • Hammers             $451
  • Saws                    $891
  • Screwdrivers       $231
  • sub-total            $1,573

Paint products:         $2,022

  • 1-gallon cans     $1,681
  • Paint brushes      $341
  • sub-total           $2,022

Total                          $3,595

2) adjustment to tools:

Dr Cost of goods sold 110

    Cr Inventory: tools 110

adjustment to paint products:

Dr Cost of goods sold 410

    Cr Inventory: paint products 410

or total adjustment to inventory account:

Dr Cost of goods sold 520

    Cr Inventory 520