A home improvement store, like Lowe’s, carries the following items: Inventory Items Quantity Unit Cost Unit NRV Hammers 100 $6.80 $7.30 Saws 50 9.80 8.80 Screwdrivers 130 1.80 2.40 Drills 40 24.80 21.60 One-gallon paint cans 160 5.30 4.80 Paintbrushes 180 5.80 6.30
A home improvement store, like Lowe’s, carries the following items: Inventory Items Quantity Unit Cost Unit NRV Hammers 100 $6.80 $7.30 Saws 50 9.80 8.80 Screwdrivers 130 1.80 2.40 Drills 40 24.80 21.60 One-gallon paint cans 160 5.30 4.80 Paintbrushes 180 5.80 6.30
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A home improvement store, like Lowe’s, carries the following items:
Inventory Items | Quantity | Unit Cost | Unit NRV |
---|---|---|---|
Hammers | 100 | $6.80 | $7.30 |
Saws | 50 | 9.80 | 8.80 |
Screwdrivers | 130 | 1.80 | 2.40 |
Drills | 40 | 24.80 | 21.60 |
One-gallon paint cans | 160 | 5.30 | 4.80 |
Paintbrushes | 180 | 5.80 | 6.30 |
Required:
1. Compute the total cost of inventory.
2. Determine whether each inventory item would be reported at cost or net realizable value, and then place that unit amount in the “Lower of Cost and NRV per unit” column. Multiply the quantity of each inventory item by the appropriate cost or NRV unit amount and place the total in the “Total” column.
3. Record any necessary
4. Determine the financial statement effects of using lower of cost and net realizable value to report inventory.

Transcribed Image Text:Determine the financial statement effects of using lower of cost and net realizable value to report inventory. (Make sure to enter amounts leading to
account reduction with a minus sign.)
Revenues
Income Statement:
Expenses
Net Income
Balance Sheet:
Stockholders'
Assets
Liabilities
Equity

Transcribed Image Text:Determine whether each inventory item would be reported at cost or net realizable value, and then place that unit amount in
the "Lower of Cost and NRV per unit" column. Multiply the quantity of each inventory item by the appropriate cost or NRV unit
amount and place the total in the "Total" column. (Round "Cost per Unit" to 2 decimal places.)
Inventory Items
Cost or NRV
Lower of Cost
and NRV per
Unit
Total
Hammers
Saws
Screwdrivers
Drills
One-gallon paint cans
Paintbrushes
Total
Show less▲
Expert Solution

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Step 1: Introduction:
VIEWStep 2: (1) Compute the total cost of the entire inventory:
VIEWStep 3: (2) Determine whether each inventory item would be reported at cost or net realizable value:
VIEWStep 4: (3) Prepare necessary entry to write down inventory from cost to net realizable value:
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