Friday 11 October 2013

A physical inventory of Helmke Company taken at December 31 reveals the following. Per Unit Item Units Cost Market Audio equipment Receivers 335 $ 90 $ 98 CD players 250 111 100 MP3 players 316 86 95 Speakers 194 52 41 Video equipment Handheld LCDs 470 150 125 VCRs 281 93 84 Camcorders 202 310 322 Car audio equipment Satellite radios 175 70 84 CD/MP3 radios 160 97 105 Required: 1. Calculate the lower of cost or market for the inventory applied separately to each item.

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

    Per Unit
   
  Item Units Cost Market
   Audio equipment          
       Receivers 335     $ 90    $ 98   
       CD players 250       111      100   
       MP3 players 316       86      95   
       Speakers 194       52      41   
  Video equipment          
       Handheld LCDs 470       150      125   
       VCRs 281       93      84   
       Camcorders 202       310      322   
  Car audio equipment          
       Satellite radios 175       70      84   
       CD/MP3 radios 160       97      105   


Required:
1.
Calculate the lower of cost or market for the inventory applied separately to each item.

Explanation:
1.
    Per Unit              
   
             
  Item Units Cost Market Total
Cost
Total
Market
LCM applied
to Items
 
  Audio equipment                        
     Receivers 335    $ 90     $ 98     $ 30,150   $ 32,830   $ 30,150     
     CD players 250      111       100       27,750     25,000     25,000     
     MP3 players 316      86       95       27,176     30,020     27,176     
     Speakers 194      52       41       10,088     7,954     7,954     
  Video equipment                        
     Handheld LCDs 470      150       125       70,500     58,750     58,750     
     VCRs 281      93       84       26,133     23,604     23,604     
     Camcorders 202      310       322       62,620     65,044     62,620     
  Car audio equipment                        
     Satellite radios 175      70       84       12,250     14,700     12,250     
     CD/MP3 radios 160      97       105       15,520     16,800     15,520     
           

   

 
  Total           $ 282,187       $ 263,024     
           



   



 


Lower of cost or market for inventory applied separately = $263,024

2.
To adjust inventory cost to market.
$19,163 = $282,187 − $263,024
 

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