# A physical inventory of liverpool company taken at december 31 reveals the following.

A physical inventory of Liverpool Company taken at December 31
reveals the following.

 Per Unit Item Units Cost Market Car audio equipment Speakers 345 $90$ 98 Stereos 260 111 100 Amplifiers 326 86 95 Subwoofers 204 52 41 Security equipment Alarms 480 150 125 Locks 291 93 84 Cameras 212 310 322 Binocular equipment Tripods 185 70 84 Stabilizers 170 97 105

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.

Calculate the lower of cost or market for the inventory applied
separately to each item.

 Per Unit Total LCM applied to: Item Units Cost Market Cost Market Individual Items Car audio equipment Speakers 345 $90$98 Stereos 260 111.00 100.00 Amplifiers 326 86.00 95.00 Subwoofers 204 52.00 41.00 Security equipment Alarms 480 150.00 125.00 Locks 291 93.00 84.00 Cameras 212 310.00 322.00 Binocular equipment Tripods 185 70.00 84.00 Stabilizers 170 97.00 105.00 Total

Journal entry worksheet

Record LCM adjustment.

Note: Enter debits before credits.

 Date General Journal Debit Credit
 Dec 31

## Answer

Answers

• All working forms part of the answer
• Requirement 1
 Per Unit Total LCM applied to: Item Units Cost Market Cost Market Individual Items [A] [B] [C] [D = A x B] [E = A x C] [Lower Value of ‘D’ or ‘E’] Car audio equipment Speakers 345 $90.00$                     98.00 $31,050.00$               33,810.00 $31,050.00 Stereos 260$                   111.00 $100.00$        28,860.00 $26,000.00$         26,000.00 Amplifiers 326 $86.00$                     95.00 $28,036.00$               30,970.00 $28,036.00 Subwoofers 204$                     52.00 $41.00$        10,608.00 $8,364.00$           8,364.00 Security equipment Alarms 480 $150.00$                   125.00 $72,000.00$               60,000.00 $60,000.00 Locks 291$                     93.00 $84.00$        27,063.00 $24,444.00$         24,444.00 Cameras 212 $310.00$                   322.00 $65,720.00$              68,264.00 $65,720.00 Binocular equipment Tripods 185$                     70.00 $84.00$        12,950.00 $15,540.00$         12,950.00 Stabilizers 170 $97.00$                   105.00 $16,490.00$               17,850.00 $16,490.00 Total$     292,777.00 $285,242.00$     273,054.00
• Requirement 2

Inventory at Cost = $292,777 Adjusted Value of Inventory at LCM =$
273,054

Amount of LCM adjustment = 292777 –
273054 = $19,723  Date General Journal Debit Credit Dec-31 Cost of Goods Sold$   19,723.00 Inventory \$ 19,723.00 (LCM adjusted)