Question

Tatum Company has four products in its inventory. Information about the December 31, 2021, inventory is as follows: Product Total Cost Total Net Realizable Value 101 $ 154,000 $ 117,000 102 111,000 127,000 103 77,000 67,000 104 47,000 67,000 Required: 1. Determine the carrying value of inventory at December 31, 2021, 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

Tatum Company

1. The carrying value of inventory at December 31, 2021 is:

$342,000

2. Adjusting Journal Entry:

Debit Inventory write-downs $47,000

Credit Inventory $47,000

To record the write-down of inventory value to LCNRV.

Step-by-step explanation:

a) Data and Calculations:

Product Total Cost Total Net Reali- LCNRV Write-downs

zable Value

101 $ 154,000 $ 117,000 $ 117,000 $ 37,000

102 111,000 127,000 111,000 0

103 77,000 67,000 67,000 10,000

104 47,000 67,000 47,000 0

Total $ 389,000 $ 378,000 $ 342,000 $ 47,000