Question

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

		Per Unit
Item	Units	Cost			Market
Car audio equipment
Speakers	350	$	105		$	113
Stereos	265		126			116
Amplifiers	331		101			110
Subwoofers	209		67			57
Security equipment
Alarms	485		165			155
Locks	296		108			98
Cameras	217		327			337
Binocular equipment
Tripods	190		89			99
Stabilizers	175		110			120

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.
  

	Per Unit Total LCM applied to: Item Units Cost Market Cost Market Individual Items Car audio equipment Speakers 350 $105 $113 Stereos 265 126 116 Amplifiers 331 101 110 Subwoofers 209 67 57 Security equipment Alarms 485 165 155 Locks 296 108 98 Cameras 217 327 337 Binocular equipment Tripods 190 89 99 Stabilizers 175 110 120 Total

·                Required 1

·               

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·Record LCM adjustment.

Record LCM adjustment.

	Date General Journal Debit Credit Dec 31

Answer 1

	A			Per Unit		Total		LCM applied to:		Difference
		Item	Units	Cost	Market	Cost	Market	Individual Items
		Car audio equipment:
		Speakers	350	105	113	36750	39550	36750		0
		Stereos	265	126	116	33390	30740	30740		2650
		Amplifiers	331	101	110	33431	36410	33431		0
		Subwoofers	209	67	57	14003	11913	11913		2090
		Security equipment:
		Alarms	485	165	155	80025	75175	75175		4850
		Locks	296	108	98	31968	29008	29008		2960
		Cameras	217	327	337	70959	73129	70959		0
		Binocular equipment:
		Tripods	190	89	99	16910	18810	16910		0
		Stabilizers	175	110	120	19250	21000	19250		0
		Total				336686	335735	324136		12550
	Dec 31	Loss on LCM Adjustment	12550
		To Finished Goods Inventory		12550
		(Being Loss Recorded)