Item Units Unit Cost

A 1,000 120
B 1,500 110
C 1,200 150
D 1,800 140
E 1,700 130
Total
Nrv LCNRV Inventory Value
150 120,000
120 165,000
140 168,000
160 252,000
160 221,000
926,000
Product Unit Cost Nrv LCNRV Inventory Value
1 700 650 650
2 475 745 475
3 255 250 250
4 450 740 450
1,825
 Cost Nrv
Skis 2,200,000 2,500,000
Boots 1,700,000 1,500,000
Ski equipment 700,000 800,000
Skii apparel 400,000 500,000
Total 5,000,000

Entry
Direct Method
Ending Inventory 4,800,000
Income Summary 4,800,000

Allowance Method
Ending Inventory 5,000,000
Income Summary 5,000,000

Loss on inventory write down 200,000

Allowance for inventory write down 200,000
LCNRV Inventory Value
2,200,000
1,500,000
700,000
400,000
4,800,000
 Step 1
Category 1 Units Cost Nrv
A 25,000 105 115
B 20,000 85 80

Category 2
D 40,000 50 40
E 30,000 65 60
Total

Step 2
Category 1 Total Cost (Unit cost x cost) NRV (Units x NRV) LCNRV Inventory Value
A 2,625,000 2,875,000 2,625,000
B 1,700,000 1,600,000 1,600,000
Sub total 4,325,000 4,475,000
Category 2
D 2,000,000 1,600,000 1,600,000
E 1,950,000 1,800,000 1,800,000
Sub total 3,950,000 3,400,000 7,625,000

Grand Total 8,275,000 7,875,000 7,625,000

A LCNRV individual 7,625,000

B LCNRV by category
Total Cost NRV LCNRV
Category 1 4,325,000 4,475,000 4,325,000
Category 2 3,950,000 3,400,000 3,400,000
7,725,000

C LCNRV Inventory as a whole

Total Cost 8,275,000

Total NRV 7,875,000
LCNRV by total 7,875,000 Still the lowest between cost and NRV
1 Unit Cost Total Cost
Sep-30 40,000 75 3,000,000
Dec-31 10,000 90 900,000
Total Fifo Cost 3,900,000
NRV 50K x72 3,600,000
Required Allowance for write down 300,000

2
Inventort Jan1 1,200,000
Purchase 9,400,000
Purchase Discount -400,000
TGAS 10,200,000
Less: Inventory (FIFO COST) 3,900,000
COGS Write down before 6,300,000
Gain on berfore the write down (400k-300k) -100,000
COGS after the write down 6,200,000

Entry
Inventory Dec 31 3,900,000
Income Summary 3,900,000

Allowance on inventory write down (400k-300k) 100,000

Gain on the reversal of the write down 100,000
A No entry gain did not record in principle of conservatism
B No entry because it is just 'expected' not even happening/ should be possible to be record

C Loss on purchase commitment (10k x 30) 300,000

Estimated liability of the purchase commitment 300,000

D Dec 31 2022
Loss on purchase commitment (10k x 30) 300,000
Estimated liability of the purchase commitment 300,000

Jan31 2023
Purchase ( 100k x 150) 1,500,000
Loss on purchase commitment (200 x 10) 200,000
Estimated liability for the purchase 300,000
Accounts Payble (10,000 x 200) 2,000,000

E Dec 31 2021
Loss on purchase commitment (10k x 30) 300,000
Estimated liability of the purchase commitment 300,000

Jan 31 2022
Purchase (10K x 200) 2,000,000 w
Estimated liability for the purchase 300,000
Accounts Payable 2,000,000
Gain or purchase commitment 300,000
will not recognize the increase or gain stick to the purchase commitment before

the transaction is already done so it can recognize the gain on the purchase
Dec 31 2021
Loss on purchase commitment (100k x 5) 500,000
Estimated liability of the purchase commitment 500,000

March 31 2022 Purchase (100 k x 54) 5,400,000

Estimated liability of the purchase commitment 500,000
Accounts Payable 5,400,000
Gain or purchase commitment 500,000