Question

A physical inventory of Liverpool Company taken at December 31 reveals the following. Per Unit Units Cost Market $ 97 118 342 257 323 201 $105 107 102 93 59 48 Item Car audio equipment Speakers Stereos Amplifiers Subwoofers Security equipment Alarms Locks Cameras Binocular equipment Tripods Stabilizers 477 288 209 157 100 317 132 91 329 91 182 167 77 104 112 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

Answer 1

		Per unit		Total		LCM applied to
Item	Units	Cost	Market	Cost	Market		Individual items
Car Audio Equipment
Speakers	342	97	105	33174	35910		33174
Stereos	257	118	107	30326	27499		27499
Amplifiers	323	93	102	30039	32946		30039
Subwoofers	201	59	48	11859	9648		9648
Security Equipment
Alarms	477	157	132	74889	62964		62964
Locks	288	100	91	28800	26208		26208
Cameras	209	317	329	66253	68761		66253
Binocular Equipment
Tripods	182	77	91	14014	16562		14014
Stabilizers	167	104	112	17368	18704		17368
Total				306722	299202	299202	287167
2
General Journal	Debit	Credit
Cost of goods sold	19555		=306722-287167
Merchandise Inventory		19555