Problem 5-5A Lower of cost or market LO P2 A physical inventory of Liverpool Com

Question

Problem 5-5A Lower of cost or market LO P2 A physical inventory of Liverpool Company taken at December 31 reveals the following. Per Unit Units Cost Market Item Car audio equipment 343 98 106 108 103 49 Stereos 258 324 202 119 Amplifiers Subwoofers 60 Security equipment Locks Cameras 478 158 289 101 210 318 133 92 330 Binocular equipment Tripods Stabi1izere 183 168 78 105 92 113 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. Required 1 Required 2 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 Car audio equipment 343 98 106 108 103 258 119 60 Security equipment 158 101 318 478 133 210 330 Binocular equipment Tripods 183 78 168 105 113 Total Required 2 Journal entry worksheet Record LCM adjustment. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31 Record entry Clear entry View general journal

Explanation / Answer

Answer = 2 Per Unit Total LCM Applied to ITEM Units Cost Market Cost Market Individual Items Car Audio Equipment              343 $98 $106 $33,614 $36,358 $33,614 Speakers              258 $119 $108 $30,702 $27,864 $27,864 Stereos              324 $94 $103 $30,456 $33,372 $30,456 Amplifiers              202 $60 $49 $12,120 $9,898 $9,898 Subwoofers Security Equipment Alarms              478 $158 $133 $75,524 $63,574 $63,574 Locks              289 $101 $92 $29,189 $26,588 $26,588 Cameras              210 $318 $330 $66,780 $69,300 $66,780 Binocular Equipment Tripods              183 $78 $92 $14,274 $16,836 $14,274 Stablizers              168 $105 $113 $17,640 $18,984 $17,640 TOTAL $3,10,299 $3,02,774 $2,90,688 Difference = Total Cost - LCM Cost Difference = $19,611 Answer = 1 Date General Journal Debit Credit Dec-31 Loss on LCM Adjustment $19,611.00         To Inventory Account $19,611.00 (Being Difference of Cost and LCM are recorded)

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