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Peterson Furniture Designs is preparing its annual financial statements dated December 31. Ending inventory information about the five major items stocked for regular sale follows: Required: 1-a. Complete the final two columns of the table. Ending Inventory Item Quantity on Hand Total LC&NRV Alligator Armoires Bear Bureaus Cougar Beds Dingo Cribs Elephant Dressers Unit Cost Net When Realizable LC&NRV Acquired Value at per Item (FIFO) Year-End $ 25 $ 22 50 6062 40 40 20 1 6 20 40 450 1-b. Compute the amount that should be reported for the ending inventory using the LC&NRV rule applied to each item. Ending inventory 2. Prepare the journal entry that Peterson Furniture Designs would record on December 31.

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Answer:

                              Peterson Furniture Designs

                                      Ending Inventory

                                      Q         Purchase cost         NRV        Total LC&NRV

Alligator Armoires         60                  $25                $22              $1,320

Bear Bureaus                85                  $50                $50             $4,250

Cougar Beds                 20                  $60                $62             $1,200

Dingo Cribs                   40                  $40                $40              $1,600

Elephant Dressers       450                 $20                $16              $7,200

Total                                                                                               $15,570

The value of the ending inventory using lower of cost or net realizable value (LCNRV) is $15,570. The individual LCNRV is underlined for each item.

Since the purchase cost ($17,550) is higher than the ending inventory, the journal entry should be:

December 31, 202x, adjusting value of ending inventory

Dr Cost of goods sold 1,980

    Cr merchandise inventory 1,980