A company reports inventory using the lower of cost and net realizable value. Below is information related to its year-end inventory: Inventory Quantity Cost NRV Unit A 14 $ 38 $ 40 Unit B 22 42 39 Unit C 16 27 31 Unit D 19 18 17 a. Calculate ending inventory under the lower of cost and net realizable value. b. Prepare the necessary adjusting entry to inventory. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

a. The computation of the ending inventory is shown below:

Inventory Quantity Cost NRV LCM Total inventory

(1) (2) (1 * 2)

Unit A 14 $38 $40 $38 $532

Unit B 22 $42 $39 $39 $858

Unit C 16 $27 $31 $27 $432

Unit D 19 $18 $17 $17 $323

Total $2,145

And total cost = Unit A * cost + Unit A * cost + Unit A * cost + Unit A * cost

= 14 * $38 + 22 * $42 + 16 * $27 + 19 * $18

= $532 + $924 + $432 + $342

= $2,230

b. The journal entry is shown below:

Income summary A/c Dr $85 ($2,230 - $2,145)

To Inventory A/c $85

(Being inventory is adjusted)