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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.

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Answer #1

Valuation of the company's ending inventory using the lower-of-cost-or-market method

Item code Quantity Unit cost Replacement cost Valuation base Value of inventory
ZXE 100 42 40 Replacement cost 4,000
XYF 300 53 54 Unit cost 15,900
MNJ 400 42 40 Replacement cost 16,000
UBS 200 53 57 Unit cost 10,600
$46,500

Hence, value of ending inventory = $46,500

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