Question

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

	A	B	C	D
1	Item	Units	Cost per Unit	Market per Unit
2
3	Office furniture
4	Desks	536	$261	$305
5	Chairs	395	227	256
6	Mats	687	49	43
7	Bookshelves	421	93	82
8	Filing cabinets
9	Two-drawer	114	81	70
10	Four-drawer	298	135	122
11	Lateral	75	104	118
12	Office equipment
13	Projectors	370	168	200
14	Copiers	475	317	288
15	Phones	302	125	117

Required

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

Check (1) $580,054

2. If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to the Merchandise Inventory account.

Answer 1

Solution:
CALCULATION OF INVENTORY VALUE AS PER LOWER OF COST OR NET REALIZABLE VALUE
PRODUCT	Quantity (A)	Unit Cost	Market Per Unit	Unit Cost or Market Value whichever is less(B)	Inventory Cost (AXB)
Office Furniture
Desks	536	$                   261	$                            305	$                            261	$      1,39,896
Chairs	395	$                   227	$                            256	$                            227	$          89,665
Mats	687	$                      49	$                              43	$                              43	$          29,541
Bookshelves	421	$                      93	$                              82	$                              82	$          34,522
Filling Cabinets
Two Drawer	114	$                      81	$                              70	$                              70	$            7,980
Four Drawer	298	$                   135	$                            122	$                            122	$          36,356
Lateral	75	$                   104	$                            118	$                            104	$            7,800
Office Equipment
Projectors	370	$                   168	$                            200	$                            168	$          62,160
Copiers	475	$                   317	$                            288	$                            288	$      1,36,800
Phones	302	$                   125	$                            117	$                            117	$          35,334
			Total		$      5,80,054
Answer = $ 580,054