Question

In: Accounting

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

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

Per Unit
Item Units Cost Market
Car audio equipment
Speakers 349 $ 104 $ 112
Stereos 264 125 115
Amplifiers 330 100 109
Subwoofers 208 66 56
Security equipment
Alarms 484 164 154
Locks 295 107 97
Cameras 216 326 336
Binocular equipment
Tripods 189 88 98
Stabilizers 174 109 119


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.

Solutions

Expert Solution

Answer:

1.)

Per unit Total LCM applied to:
Item Units Cost Market Cost Market Entire Inventory Individual Items
Car audio equipment
Speakers 349 $104 $112 $36,296 $39,088 $36,296
Stereos 264 $125 $115 $33,000 $30,360 $30,360
Amplifiers 330 $100 $109 $33,000 $35,970 $33,000
Subwoofers 208 $66 $56 $13,728 $11,648 $11,648
Security equipment
Alarms 484 $164 $154 $79,376 $74,536 $74536
Locks 295 $107 $97 $31,565 $28,615 $28,615
Cameras 216 $326 $336 $70,416 $72,576 $70,416
Binocular equipment
Tripods 189 $88 $98 $16,632 $18,522 $16,632
Stabilizers 174 $109 $119 $18,966 $20,706 $18,966
Total $332,979 $332,021 $270,547 $320,469

Working Notes:

Speakers cost = units*cost = 349*104 = 36296
Stereos cost = units*cost = 264*125 = 33000
Amplifiers cost = units*cost = 330*100 = 33000
Sub woofers cost = units*cost = 208*66 =13728
Alarms cost = units*cost = 484*164 = 79376
Locks cost = units*cost = 295*107 = 31565
Cameras cost = 216*326 = 70416
Tripods cost = 189*88 = 16632
Stabilizers cost = 174*109 = 18966

Speakers Market = Units*Market = 349*112 =39088
Stereos cost = 264*115 = 30360
Amplifiers cost = 330*109 = 35970
Sub woofers cost = 208*56 = 11648
Alarms cost = 484*154 = 74536
Locks cost = 295*97 = 28615
Cameras cost = 216*336 = 72576
Tripods cost = 189*98 = 18522
Stabilizers cost = 174*119 = 20706

2.)

Date General Journal Debit ($) Credit ($)
Dec 31 Cost of goods sold $12,510
Merchandise Inventory $12,510
(To record the LCM adjustments)

Working:

To adjust inventory cost to market = Total cost - LCM applied
= $332,979 - $320,469
= $12,510

ekkarill92 answered 1 year ago
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