Homework Answers
1.
| Item | Number of Units (1) | Historical Cost per unit(2) | Market Value per Unit | Lower of Cost or Market Value (3) | Ending Inventory as per lower of cost or Market value (1 x 3) | Total Cost of Inventory(1 x 2) |
| Phone | 600 | 24 | 18 | 18 | 10,800 | 14400 |
| Stereo | 180 | 177 | 190 | 177 | 31,860 | 31860 |
| Electric Shaver | 220 | 30 | 35 | 30 | 6,600 | 6600 |
| MP3 alarm clock | 430 | 26 | 25 | 25 | 10,750 | 11180 |
| Handheld game System | 570 | 40 | 19 | 19 | 10,830 | 22800 |
| Total | 70,840 | 86,840 |
The carrying value of the ending inventory using lower of cost or market rule applied on an item-by-item basis is $70,840.
2.
Total Cost of inventory = $86,840
Total cost of lower of cost or market = $70,840
Difference of cost = Total Cost of inventory - Total cost of lower of cost or market
= 86,840-70,840
= $16,000
| General Journal | Debit | Credit |
| Cost of goods sold | $16,000 | |
| Inventory | $16,000 |
Kindly comment if you need further assistance. Thanks‼!
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