Mondetta Clothing prepared its annual financial statements dated December 31. Th

Question

Mondetta Clothing prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows:

330,000

   Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory:

Acquisition Cost

Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item-by-item basis.

Compare the LCM effect on each amount that was changed in requirement 1. (Decreases should be indicated by a minus sign.)

Mondetta Clothing prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows:

Explanation / Answer

Ending Inventory LCM Valuation :-

Income Statement :-

2) LCM Effect on Each Amount :-

Item Qty. Cost Market Value LCM Total A 3800 5.30 6.80 5.30 $20140 B 1900 7.60 3.80 3.80 $7220 C 7800 3.80 6.80 3.80 $29640 D 3800 8.30 5.30 5.30 $20140 Total $77140

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