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.
Journal entry worksheet Record LCM adjustment. Note: Enter debits before credits.
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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 |
$ |
$ |
$ 31,050.00 |
$ |
$ 31,050.00 |
| Stereos | 260 |
$ |
$ |
$ 28,860.00 |
$ |
$ 26,000.00 |
| Amplifiers | 326 |
$ |
$ |
$ 28,036.00 |
$ |
$ 28,036.00 |
| Subwoofers | 204 |
$ |
$ |
$ 10,608.00 |
$ 8,364.00 |
$ 8,364.00 |
|
Security equipment |
||||||
| Alarms | 480 |
$ |
$ |
$ 72,000.00 |
$ |
$ 60,000.00 |
| Locks | 291 |
$ |
$ |
$ 27,063.00 |
$ |
$ 24,444.00 |
| Cameras | 212 |
$ |
$ |
$ 65,720.00 |
$ 68,264.00 |
$ 65,720.00 |
|
Binocular equipment |
||||||
| Tripods | 185 |
$ |
$ |
$ 12,950.00 |
$ |
$ 12,950.00 |
| Stabilizers | 170 |
$ |
$ |
$ 16,490.00 |
$ |
$ 16,490.00 |
| Total | $ 292,777.00 |
$ |
$ 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) |