Question

What does the lower-of-cost-or-market (LCM) rule require? (100+ words)

What does the lower-of-cost-or-market (LCM) rule require? (100+ words)

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The lower of cost or market (LCM) method states that when valuing a company's inventory, it is recorded on the balance sheet at either the historical cost or the market value. Historical cost refers to the cost at which the inventory was purchased.

The value of a good can shift over time. This holds significance, because if the price at which the inventory can be sold falls below the net realizable value of the item, thus triggering a loss for the company, then the lower of cost or market method can be employed to record the loss.

The LCM method is a tenet of the generally accepted accounting principles (GAAP).

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What does the lower-of-cost-or-market (LCM) rule require?
What does the lower-of-cost-or-market (LCM) rule require?
What does the lower-of-cost-or-market (LCM) rule require?
What does the lower-of-cost-or-market (LCM) rule require?
Describe the lower of cost or market rule (LCM) and how it differs from the lower...
Describe the lower of cost or market rule (LCM) and how it differs from the lower of cost or net realizable value rule. a) Description of the LCM rule b) Use of floors and ceilings
True or False 9. The lower of cost or market (LCM) rule violates the historical cost...
True or False 9. The lower of cost or market (LCM) rule violates the historical cost principle. 10. A six-month certificate of deposit would be considered to be a cash equivalent. 11. If collection of accounts receivable is assured, then accounts receivable are considered to be cash equivalent. 12. When reconciling a bank, the company does not have to prepare an adjustment entry for outstanding checks.
Beerbo follows the lower-of-cost-or-market (LCM) rule to value its inventory.  All of Beerbo's products have a 10%...
Beerbo follows the lower-of-cost-or-market (LCM) rule to value its inventory.  All of Beerbo's products have a 10% profit margin on selling price. Per unit information about Beerbo Inc.'s inventory of products is as follows: A B C D E Historical cost $80 $100 $50 $90 $95 Replacement cost $88 $90 $45 $36 $105 Estimated selling price $140 $130 $80 $100 $120 Estimated cost to complete $15 $22 $40 $19 $11 Estimated cost to dispose / sell $5 $8 $0 $9 $17...
Discuss the lower of cost or market (LCM) in relationship with usefulness of accounting information
Discuss the lower of cost or market (LCM) in relationship with usefulness of accounting information
Lower-of-Cost-or-Market (LCM) Method The following data are taken from the Smith & Wesson Corporation's inventory accounts:...
Lower-of-Cost-or-Market (LCM) Method The following data are taken from the Smith & Wesson Corporation's inventory accounts: Item Code Quantity Unit Cost Replacement Cost ZXE 100 $42 $40 XYF 300 53 54 MNJ 400 42 40 UBS 200 53 57 Calculate the value of the company's ending inventory using the lower-of-cost-or-market method applied to each item of inventory.
Lower of Cost or Market Stiles Corporation uses the lower of cost or market rule for...
Lower of Cost or Market Stiles Corporation uses the lower of cost or market rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows: Product A Product B Historical cost $80 $96 Replacement cost 70 98 Estimated cost of disposal 32 47 Estimated selling price 150 200 Required: What is the correct inventory value for each product?...
Lower-of-Cost-or-Market Inventory On the basis of the following data, determine the value of the inventory at...
Lower-of-Cost-or-Market Inventory On the basis of the following data, determine the value of the inventory at the lower of cost or market. Total Product Inventory Quantity Cost per Unit Market Value per Unit (Net Realizable Value) Cost Market LCM Adams 100 $140 $125 $_____ $_____ $______ Coolidge 375 90 112 ______ ______ ______ McKinley 220 60 59 ______ ______ ______ Garfield 900 120 115 ______ ______ ______ Lincoln 626 140 145 ______ ______ ______ Total $_____ $_____ $______
Lower of Cost or Market Stiles Corporation uses the lower of cost or market rule for...
Lower of Cost or Market Stiles Corporation uses the lower of cost or market rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows: Product A Product B Historical cost $80 $96 Replacement cost 70 98 Estimated cost of disposal 32 30 Estimated selling price 150 120 Required:Assume that Stiles uses the FIFO inventory method. What is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT