The Almaden Hardware Store sells two distinct types of products, tools and paint products. Information pertaining to its 2007 year-end inventory is as follows:
Inventory Per Unit Designated
By product type Quantity Cost Market
Hammers 100 $ 5.00 $ 5.50
Saws 200 10.00 9.00
Screwdrivers 300 2.00 2.60
1-gallon cans 500 6.00 5.00
Paint brushes 100 4.00 4.50
(a) Determine the balance sheet inventory carrying value at year-end, assuming the LCM rule is applied to 1. individual products, 2. product type, and 3. total inventory.
(b) Assuming that the company recognizes an inventory write-down as a separate income statement item, for each of the LCM applications determine the amount of the loss.
The solution compute inventory using LCM and recognize write down for Almaden Hardware Store.