Question: Ace Hardware Store sells two product categories, tools and paint products. Information pertaining to its year-end inventory is as follows: Inventory, by Product Category Quantity Per Unit Cost Net Realizable Value Tools: Hammers 120 $4.00 $4.50 Saws 100 9.00 8.00 Screwdrivers 200 1.00 1.60 Paint products: 1-gallon cans 400 5.00 4.00 Paint brushes 120 3.00 3.50 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 Ace, record any necessary year-end adjusting entry for each of the LCNRV applications in requirement 1.

Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter6: Receivables And Inventories
Section: Chapter Questions
Problem 6.4.3P: Inventory by three cost flow methods Details regarding the inventory of appliances on January 1,...
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Question:
Ace Hardware Store sells two product categories, tools and paint products. Information
pertaining to its year-end inventory is as follows:
Inventory, by Product Category Quantity Per Unit Cost Net Realizable Value
Tools:
Hammers
120
$4.00
$4.50
Saws
100
9.00
8.00
Screwdrivers
200
1.00
1.60
Paint products:
1-gallon cans
400
5.00
4.00
Paint brushes
120
3.00
3.50
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 Ace, record any necessary year-end
adjusting entry for each of the LCNRV applications in requirement 1.
Transcribed Image Text:Question: Ace Hardware Store sells two product categories, tools and paint products. Information pertaining to its year-end inventory is as follows: Inventory, by Product Category Quantity Per Unit Cost Net Realizable Value Tools: Hammers 120 $4.00 $4.50 Saws 100 9.00 8.00 Screwdrivers 200 1.00 1.60 Paint products: 1-gallon cans 400 5.00 4.00 Paint brushes 120 3.00 3.50 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 Ace, record any necessary year-end adjusting entry for each of the LCNRV applications in requirement 1.
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