Part 1 AND part 2 required Taturm Company has four products in its inventory. In
ID: 2549027 • Letter: P
Question
Part 1 AND part 2 required
Taturm Company has four products in its inventory. Information about the December 31, 2013, inventory is as follows Procuct Total Cost Assuming that inventory write-downs are common tor Tatum Company, record any nacasary yaar-and adjusting entry (1t na cntry is required for transaction/event, sclcct'No journal cntry required' in the first account ficld.) The normal gross profit percentage is 25% of 10tal cost. Journal entry worksheet Required 1. Determine the rarrying value of inventary December 31, 2018, assuming the lnwer afrast ar market(LCM) rule applied to ndividuel producls 2 Assuming tha: inventory write downs are cemmon for Tatum Company, record any necessary year end adjusting entry. Recand any necassaryr-end usting antry ass iming that invantary we- downs are ccmmon for Tatum Company Complete this question by entering your answers in the tabs below. Nore: Enter debits betore credrs Rcquirsd 1Rcquired 2 applied Determine the carrying value of inventory at December 31, 2018, assuming the lower of cost or market(LCM) rule i to individual products. Cost NRV NRV-NP Market Record enty iww general journal 104 lotal: S Raquirad 7Explanation / Answer
1 solution :-
$70,000
($100,000 - ($120,000 × 25%))
$87,500
($110,000 - ($90,000 × 25%))
$40,000
$35,000
($50,000 - ($60,000 × 25%))
$42,500
($50,000 - ($30,000 × 25%))
B Answer :- Cost is $300,000 and Inventory Value or Net realisable value is $257,500
Therefore the difference in cost and inventory value is the gain or loss. Here in the given case the cost is more than the net realisable value therefore it results in loss of $42,500 ($300,000 - $257,500)
Journal entry is as follows :-
Loss due to decline in NRV of inventory $42,500
Allowance to reduce inventory to NRV $42,500
Product Replacement Cost Ceiling NRV Floor NRV - NP Designaged market Cost Inventory Value (Lower of designated market or cost) 101 $110,000 $100,000$70,000
($100,000 - ($120,000 × 25%))
$100,000 $120,000 $100,000 102 $85,000 $110,000$87,500
($110,000 - ($90,000 × 25%))
$87,500 $90,000 $87,500 103$40,000
$50,000$35,000
($50,000 - ($60,000 × 25%))
$40,000 $60,000 $40,000 104 $28,000 $50,000$42,500
($50,000 - ($30,000 × 25%))
$42,500 $30,000 $30,000 Totals $300,000 $257,500