A physical inventory of Liverpool Company taken at December 31 reveals the following. Per Unit ItemUnitsCostMarket Car audio equipment Speakers343$98 $106 Stereos258 119 108 Amplifiers324 94 103 Subwoofers202 60 49 Security equipment Alarms478 158 133 Locks289 101 92 Cameras210 318 330 Binocular equipment Tripods183 78 92 Stabilizers168 105 113 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.

Answer is explained below.

Explanation:

Items Per Unit Total LCM Applied to

Units Cost Market Cost Market Individual Items

Car audio equipment

Speakers 343 98 106 33,614 36,358 33,614

Stereos 258 119 108 30,702 27,864 27,864

Amplifiers 324 94 103 30,456 33,372 30,456

Subwoofers 202 60 49 12,120 9,898 9,898

Security Equipment - -

Alarms 478 158 133 75,524 63,574 63,574

Lock 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

Stabilizers 168 105 113 17,640 18,984 17,640

Cost Market Individual Items

TOTAL 3,10,299 3,02,774 2,90,688

Journal Entry to record the Adjustment for Inventory

Account Tittles and Explanations Debit ($) Credit ($) Cost of Goods Sold A/c 19,611

To Inventory A/c 19,611

[Entry to Write down the inventory

value to the market value] [$310,299 - 290,688]