Peterson Furniture Designs is preparing the annual financial statements dated December 31. Ending inventory information about the five major items stocked for regular sale follows:

Item Quantity Unit Cost Market Value LCM per Total LCM Recorded
on Hand When Acquired at Year Item Total Cost
(FIFO)

Alligator-
Armoires 70 $46 $41 $3,220
Bear-
Bureaus 85 80 80 6,800
Cougar-
Credenzas 10 90 92 900
Dingo-
Cribs 35 35 35 1,225
Elephant-
Dressers 400 15 12 6,000

Prepare the journal entry Peterson Furniture Designs would record on December 31 to write down its inventory to LCM/NRV.

Journal entry

31 December  Debit Inventory write_down (loss) 1550, Credit inventory 1550

Explanation:

Inventory is accounted for at the lower of cost or net realizable value. inventory write_ down is impairment  a loss to the organisation

there can never be a gain when revaluing inventory,  either it remains at cost or goes down with NRV

                                                                     cost           market         write down

closing inventory calculation

Alligator   ( 70 units)                                   3220           2870               350

Bear   (85 units)                                           6800        6800                  0

Cougar ( 10 units)                                        900            920                   0

Dingo ( 35 units)                                         1225             1225                 0

Elephant ( 400 units )                                 6000           4800                1200

                                                                    18145            16615              1550

COUGAR has a high market value so we value it at cost because it is the lower of the two.

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