Question

Complete the table below to identify the market value per unit amounts for each product, the total cost amounts, and the total market value amounts. Cost per Market ! O Data Table Group # Smart phone case Nolepad case Total Cost per Unit Total Market Manufacturer General Tech General Tech # of Units Unit Group # Manufacturer CRC#0f Units Sp Disposal NPM Cost General Tech General Tech Pacific Base Pacific Base Subtotal General Tech Smart phone case Notepad case Smart phone case Notepad case 5 00$11 S 650 350 600 1 S 8$5 18 27 10 19 Smart phone case Pacific Base Nolepad case Pacific Base 13 26 18 17 Subtotal Pacific Base Print Done Requirement a. Conduct a lower-ol-cost-or-market test for Case Closed assuming that it uses the individua-Htem approach for LCM computations. (Enter a if no LCM loss adjustment is required Assuming Case Closed uses the individual-item approach for LCM computations, it will record a$ loss adjustment. Requirement b. Conduct a lower-of-cost-or-market test for Case Closed assuming that it uses the group-by-group approach for LCM computations. (Assume the groups are based on the inventory manufacturer. Enter a "O" if no LCM loss adjustment is required.) Assuming Case Closed uses the group-by-group approach for LCM computations, it will record a $

Requirement c. Prepare the journal entry needed to adjust Case Closed inventory to a​ lower-of-cost-or-market (LCM) basis assuming that LCM is applied to individual items. Case ClosedCase Closed uses the indirect approach to record any adjustments to LCM.

Answer 1

	Repalcement cost shall be taken as the market price.But,it is subject to a ceiling and floor limit
	Ceiling limit =Estimated selling price-completion and disposal cost
	Floor limit=Seiling limit-Normal markup %
a.	Compute LCM for each and every item of inventory in individual item approach
	Market per unit:
	Group #	Manufacturer	Ceiling limt For market price	Floor limt For market price	Market price
			(SP-Disposal)	[Ceiling limit-NPM]	CRC subject to ceiling and floor limit
	Smartphone case	General tech	10	2	5
	Notepad case	General tech	24	14	18
	Smartphone case	Pacific base	4	1	2
	Notepad case	Pacific base	23	5	13
	LCM computation
	Group #	Manufacturer	# of units	Cost per unit	Total cost	Market per unit	Total market	LCM
					1		2	Lower of 1 & 2
	Smartphone case	General tech	400	5	2000	5	2000	2000
	Notepad case	General tech	650	19	12350	18	11700	11700
	Subtotal-General tech				14350		13700
	Smartphone case	Pacific base	350	5	1750	2	700	700
	Notepad case	Pacific base	600	17	10200	13	7800	7800
	Subtotal-Pacific base				11950		8500
b.	Compute LCM for each group of inventory
	LCM computation
	Group #	Manufacturer	# of units	Cost per unit	Total cost	Market per unit	Total market	LCM
					1		2	Lower of 1 & 2
	Smartphone case	General tech	400	5	2000	5	2000
	Notepad case	General tech	650	19	12350	18	11700
	Subtotal-General tech				14350		13700	13700
	Smartphone case	Pacific base	350	5	1750	2	700
	Notepad case	Pacific base	600	17	10200	13	7800
	Subtotal-Pacific base				11950		8500	8500
c.	Total cost of all groups=14350+11950=$ 26300
	Total market value of all groups=13700+8500=$ 22200
	Inventory write down required=26300-22200=$ 4100
	Account			Debit	Credit
	Loss on inventory write-down			4100
	Allowance to reduce inventory to market value				4100