Question

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.

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

Answer 1

1. Calculate the lower of cost or market for the inventory applied separately to each item.

	Units	Cost	Market value	Value of lower of cost or market
Car audio equipment
Speakers	354	38586	41418	38586
Stereos	269	34970	32280	32280
Amplifiers	335	35175	38190	35175
Subwoofers	213	15123	12993	12993
Security equipment
Alarms	489	82641	77751	77751
Locks	300	33600	30600	30600
Camers	221	73151	75361	73151
Binocular equipment
Tripods	194	18042	19982	18042
Stablizers	179	20406	22196	20406
Total		351694	350771	338984

2. If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to the Merchandise Inventory account

Date	account and explanation	debit	credit
	Loss on inventory	12710
	Allowance on inventory		12710