Question

Problem 6-5A Lower of cost or market LO P2

A physical inventory of Liverpool Company taken at December 31 reveals the following.   
  

		Per Unit
Item	Units	Cost			Market
Car audio equipment
Speakers	354	$	109		$	117
Stereos	269		130			120
Amplifiers	335		105			114
Subwoofers	213		71			61
Security equipment
Alarms	489		169			159
Locks	300		112			102
Cameras	221		331			341
Binocular equipment
Tripods	194		93			103
Stabilizers	179		114			124

Required:
1. Calculate the lower of cost or market for the inventory applied separately to each item.
2. If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to the Merchandise Inventory account.
  

Answer 1

		D	A	B	C=A or B	C*D	A*D
	Item	Units	Cost	Market	Lower of Cost or Market Value	Valuation Value	Cost Value	Write Off
	Car audio equipment:
	Speakers	354	109	117	109	38586	38586	0
	Stereos	269	130	120	120	32280	34970	2690
	Amplifiers	335	105	114	105	35175	35175	0
	Subwoofers	213	71	61	61	12993	15123	2130
	Security equipment:
	Alarms	489	169	159	159	77751	82641	4890
	Locks	300	112	102	102	30600	33600	3000
	Cameras	221	331	341	331	73151	73151	0
	Binocular equipment:
	Tripods	194	93	103	93	18042	18042	0
	Stabilizers	179	114	124	114	20406	20406	0
						338984	351694	12710
	Inventory Written off Account Dr.	12710
	To Inventory Account		12710