Question

Chapter 5 inventories and Cost of Sales А 267 Units Cost per Unit Market per Unit 345 260 S 90 111 $ 98 326 204 Item Car audio equipment Speakers Stereos Amplifiers Subwoofers 8 Security equipment Alarms 10/ Locks Cameras 12 Binocular equipment 13 Tripods 14) Stabilizers Required 1. Compute 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. Check (1) $273,054

Answer 1

Solution 1:

		Per unit		Total		LCM Applied to:
Item	Units	Cost	Market	Cost (Units*Cost)	Market(Units*Market)	LCM	Individual items (Cost- LCM)
Car Auto Equipment:
Speakers	345	$90	$98	$31,050	$33,810	$31,050	$0
Stereos	260	$111	$100	$28,860	$26,000	$26,000	$2,860
Amplifiers	326	$86	$95	$28,036	$30,970	$28,036	$0
Subwoofers	204	$52	$41	$10,608	$8,364	$8,364	$2,244
Security Equipment:							$0
Alarms	480	$150	$125	$72,000	$60,000	$60,000	$12,000
Locks	291	$93	$84	$27,063	$24,444	$24,444	$2,619
Cameras	212	$310	$322	$65,720	$68,264	$65,720	$0
Binocular Equipment:							$0
Tripods	185	$70	$84	$12,950	$15,540	$12,950	$0
Stabilizers	170	$97	$105	$16,490	$17,850	$16,490	$0
Total				$292,777		$273,054	$19,723

Solution 2:

Particulars	Debit	Credit
Cost Of Goods Sold Dr	$19,723
To Merchandise Inventory		$19,723
(To record LCM Adjustment)