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Compute inventory using LCM and recognize write down


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
Paint products:
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.

Solution Summary

The solution compute inventory using LCM and recognize write down for Almaden Hardware Store.