Question

SLR Corporation has 1,200 units of each of its two products in its year-end inventory. Per...

SLR Corporation has 1,200 units of each of its two products in its year-end inventory. Per unit data for each of the products are as follows:

Product 1 Product 2
Cost $ 59 $ 43
Replacement cost 57 35
Selling price 79 45
Selling costs 15 7
Normal profit margin 19 11


Determine the balance sheet carrying value of SLR’s inventory assuming that the lower of cost or market (LCM) rule is applied to individual products. What is the before-tax income effect of the LCM adjustment?

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