Question

Problem 9-4 Lower of cost or market [LO9-1 Home Stop sells two product categories, furniture and accessories. Information pertaining to its 2018 year-end inventory is as follows: Inventory, by Product Category Furniture Per Unit Quantity Market Cost Chairs 50 $26 $32 74 Desks 20 59 Tables Accessories 70 85 93 50 61 49 Rugs Lamps 30 23 Required: 1. Determine the carrying value of inventory at year-end, assuming the lower of cost or market (LCM) rule is applied to (a) individual products, (b) product categories, and (c) total inventory. 2. Assuming that the company reports an inventory write-down as a line item in the income statement, for each of the LCM applications determine the amount of the loss.

Answer 1

1) Lower of Cost or Market for the inventory applied separately to each item Per Unit Total Lower of Cost or Market By Item Units Cost Market Cost NRV By Product individual Categories products By total inventory 50 $ 26.00 20 $ 74.00 70 $ 85.00 $ $ $ Furniture : Chairs Desks Tables Total Tools Accessories : Rugs Lamps Total Pain 32.00 $ 59.00 $ 93.00 $ $ 1,300 1,480 5,950 8,730 $ $ $ $ 1,600 $ 1,180 $ 6,510 $ 9,290 1,300 1,180 5,950 $ 8,730 50 $ 61.00 $ 30 $ 23.00 $ 49.00 19.00 $ $ $ 3,050 $ 690 $ 3,740$ 2,450 $ 570 $ 3,020 2,450 570 $ 3,020 Total | $ 12,470 $ 12,310 $ 11,450 $ 11,750 $ 12,310

Amoi Amount of Loss each category wise Total Cost of Inventory Less : Lower of Cost or Market Amount of Loss Individual Product Total Products Categories Inventory $ 12,470 $ 12,470 $ 12,470 $ 11,450 $ 11,750 $ 12,310 $ 1,020 $ 720 $ 160