Question

Tatum Company has four products in its inventory. Information about the December 31, 2018, inventory is as follows:

Product	Total Cost			Total Net Realizable Value
101	$	150,000		$	115,000
102		105,000			125,000
103		75,000			65,000
104		45,000			65,000

Required:
1. Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products.
2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry.

Answer 1

(1)-The carrying value of inventory at December 31, 2018

The Inventories are valued at Lower of Cost or net Realizable Value

Product	Total Cost	Total Net Realizable Value	Carrying Value (Lower of Cost or Net Realizable Value)
101	$ 1,50,000	$1,15,000	$1,15,000
102	$1,05,000	$1,25,000	$1,05,000
103	$75,000	$65,000	$65,000
104	$45,000	$65,000	$45,000
TOTAL	$375,000		$330,000

(2)- Year-end adjusting entry to record the adjustment for Inventory

Account Tittles and Explanations	Debit ($)	Credit ($)
Cost of goods sold Ac	45,000
To Inventory A/c		45,000
[Entry to Write down the inventory value to the market value, ($375,000 - $330,000)]