McSwain Corporation is reviewing its inventory at year-end 20X1. McSwain accounts for its inventory using LIFO and applies the Lower-of-Cost-or-Market (LCM) rule. The inventory includes a batch of electronic components. The cost to purchase these components was $20,000. However, due to recent technological advances, the current replacement cost has dropped to $15,000. The net realizable value of these components is $18,000 and the normal profit margin is $2,000. After applying LCM, at what value should McSwain report the electronic components on its December 31, 20X1 balance sheet? $15,000 O $20,000 O $16,000 O $18,000
McSwain Corporation is reviewing its inventory at year-end 20X1. McSwain accounts for its inventory using LIFO and applies the Lower-of-Cost-or-Market (LCM) rule. The inventory includes a batch of electronic components. The cost to purchase these components was $20,000. However, due to recent technological advances, the current replacement cost has dropped to $15,000. The net realizable value of these components is $18,000 and the normal profit margin is $2,000. After applying LCM, at what value should McSwain report the electronic components on its December 31, 20X1 balance sheet? $15,000 O $20,000 O $16,000 O $18,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:McSwain Corporation is reviewing its inventory at year-end 20X1. McSwain accounts for its inventory using LIFO and applies the
Lower-of-Cost-or-Market (LCM) rule. The inventory includes a batch of electronic components. The cost to purchase these
components was $20,000. However, due to recent technological advances, the current replacement cost has dropped to $15,000. The
net realizable value of these components is $18,000 and the normal profit margin is $2,000.
After applying LCM, at what value should McSwain report the electronic components on its December 31, 20X1 balance sheet?
$15,000
O $20,000
O $16,000
O $18,000
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