Question

Home Stop sells two product categories, furniture and accessories. Information pertaining to its 2018 year-end inventory is as follows:

Inventory, by Product Category	Quantity			Per Unit Cost				Market
Furniture:
Chairs	50			$	37			$	43
Desks	70				85				70
Tables	60				96				104
Accessories:
Rugs	30				72				60
Lamps	70				34				30

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.

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.

	Lower of cost or market Product Cost Market By Individual Products By Product Type By Total Inventory Furniture: Chairs Desks Tables Total furniture $0 $0 Accessories: Rugs Lamps Total accessories $0 $0 Total $0 $0 $0 $0

Answer 1

Answer: Lower of cost or market By Individual Products By Total Inventory By Product Type Product Market Cost Furniture: $1,850 $4,900 $5,760 $1,850 $2,150 $5,950$4,900 $5,760 $6,240 $13,560 $13,290 $12,510 Chairs Desks Tables Total furniture $13,290 ->la Accessories: $1,800 $2,100 $3,900 $2,160 $1,800 $2,380 $2,100 $4,540 $3,900 $18,100 $17,190 $16,410 Rugs Lamps Total accessories $3,900 $17,190 S17,190 --> (a) +(b Total NOTE For individual products, each product's cost and market value is compared and inventory value is calculated by taking the minimum of each product's cost or market value. And then, product type's sum is calculated for each product type to calculate total inventory to be reported

For product type, each product type's total cost is compared to total market value and inventory value for each product type is calculated by taking the lower of cost or market value. And then, each product type's inventory value is calculated to calculate total inventory to be reported For total inventory, total cost is compared with total market value and inventory value is calculated by taking lower of cost or market value to calculate total inventory to be reported Workings Market Cost ty Per unit Total Per unit Quanti Total Furniture: $1,850 $5,950 $5,760 $13,560 $37 $85 $96 $2,150 $4,900 $6,240 $13,290 --> (a) Chairs Desks Tables Total furniture 50 70 60 $70 $104 Accessories: $1,800 $2,100 3,900 -->(b) 30 70 $72 $34 $2,160 $2,380 4,540 Rugs Lamps Total accessories $30 $18,100 $17,190 -->(a)(b) Total