Decker Company has five products in its inventory. Information about the December 31, 2021, inventory follows. Product Quantity Unit Cost Unit Selling Price A 1,000 $ 25 $ 32 B 1,200 31 36 C 1,000 2 6 D 600 5 4 E 1,000 35 32 The cost to sell for each product consists of a 10 percent sales commission. 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. Determine the carrying value of inventory at December 31, 2021, assuming the LCNRV rule is applied to the entire inventory. 3. Assuming inventory write-downs are common for Decker, record any necessary year-end adjusting entry based on the amount calculated in requirement 2.

Decker Company

1. The carrying value of inventory with LCNRV applied to individual products = $95,384

2. The carrying value of inventory with LCNRV applied to the entire inventory = $102,200

3. There is no write-down since the total cost is chosen as the LCNRV in requirement 2.

Explanation:

a) Data and Calculations:

December 31, 2021 Inventory:

Product   Quantity   Unit Cost   Unit Selling

                                                       Price

A                1,000           $ 25          $ 32

B                1,200               31             36

C               1,000                 2               6      

D                 600                 5               4  

E               1,000               35             32        

Product   Quantity   Unit Cost   Unit Selling Net Realizable LCNRV   Total

                                                       Price               Value

A                1,000           $ 25          $ 32             $29             $25   $25,000

B                1,200               31             36                33                31       37,200

C               1,000                 2               6                  5.45            2        2,000

D                 600                 5               4                  3.64            3.64    2,184

E               1,000               35             32               29               29      29,000

Carrying value of inventory                                                             $95,384

Total cost = (1,000 * $25) + (1,200 * $31) + (1,000 * $2) + (600 * $5) + (1,000 * $35)

= ($25,000) + ($37,200) + ($2,000) + ($3,000) + ($35,000)

= $102,200

Total selling price = (1,000 * $32) + (1,200 * $36) + (1,000 * $6) + (600 * $4) + (1,000 * $32)

= ($32,000) + ($43,200) + ($6,000) + ($2,400) + ($32,000)

= $115,600

= $105,091 ($115,600/1.1)

LCNRV = $102,200

reducing the scale of the market for a new product.