3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

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Textbook Question

Chapter 10, Problem 10.11E

Lower of Cost or Market. All-Kinds-of-Cases Company sells cases for smart phones and notepad computers. The company uses the LIFO method for costing inventory. All-Kinds-of-Cases groups inventory by the device manufacturer for which the case is made in its LCM computations. All-Kinds-of-Cases provided the following information regarding inventory at the end of the current year

Group No.	Manufacturer	CRC	No. of Units	SP	Disposal	NPM	Cost
Smart phone case	General Tech	$8	450	$14	$1	$ 6	$ 5
Notepad case	General Tech	14	300	35	2	18	16
Smart phone case	Pacific Base	5	750	8	2	4	7
Notepad case	Pacific Base	12	520	32	2	15	14

Definitions:

CRC = Current Replacement Cost

SP = Selling Price

DISPOSAL = Costs of Completion and Disposal

NPM = Normal Profit Margin

Required

a. Conduct a lower-of-cost-or-market test for All-Kinds-of-Cases assuming that it uses the total inventory approach for LCM computations.
b. Conduct a lower-of-cost-or-market test for Ail-Kinds-of-Cases assuming that it uses the individual-item approach for LCM computations.
c. Conduct a lower-of-cost-or-market test for AII-Kinds-of-Cases assuming that it uses the group-by-group approach for LCM computations.
d. Prepare the journal entry needed to adjust All-Kinds of Cases s inventory to a lower-of-cost-or-market (LCM) basis assuming that LCM is applied to total inventory groups All-Kinds of Cases uses the indirect approach to record any adjustments to LCM

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Chapter 10, Problem 10.10E

Chapter 10, Problem 10.12E

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