Question

A physical inventory of Liverpool Company taken at December 31 reveals the following. Per Unit Units Cost Market 350 $105 126 331 101 20967 265 $113 116 110 57 Item Car audio equipment Speakers Stereos Amplifiers Subwoofers Security equipment Alarm Tocks Cameras Binocular equipment Tripods Stabilizers 485 296 217 165 108 327 155 98 190 175 8999 110 120 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 Complete this questions by entering your answers in the tabs below. Required 1 Required 2

Answer 1

Lower of Cost or Market for the inventory applied separately to each item Per Unit Item Units Cost Market Speakers Stereos Amplifiers Subwoofers Alarms Locks Cameras Tripods Stabilizers 350 $ 265 $ 331 $ 209 $ 485 $ 296 $ 217 $ 190 $ 175 $ 105 $ 126 $ 101 $ 67 $ 165 $ 108 $ 327 $ 89 $ 110 $ 113 $ 116 $ 110$ 57 $ 155 $ 98 $ 337 $ 99 $ 120 $ $ Total Lower of Cost or Cost Market Market applied to each item 36,750 $ 39,550 $ 36,750 33,390 $ 30,740 $ 30,740 33,431 $ 36,410 $ 33,431 14,003 $ 11,913 $ 11,913 80,025 $ 75,175 $ 75,175 31,968 $ 29,008 $ 29,008 70,959 $ 73,129 70,959 16,910 $ 18,810 $ 16,910 19,250 $ 21,000 $ 19,250 336,686 324,136 Total

2) Date Date General Journal Debit Credit Dec-31 $ 12,550 Cost of Goods Sold Merchandise Inventory $ 12,550 (Adjustment of lower of cost or market is made to merchandise inventory account) Amount to be adjusted to Mechandise Inventory Total Cost of Ending Inventory Less: Total of Lower of Cost or Market applied to item wise Amount to be adjusted to Mechandise Inventory $ 336,686 $ (324,136) $ 12,550