Chapter 10, Problem 10.5P

a.

To determine

Inventory carrying value with the lower-of-cost-or-market (LCM) rule using individual item basis.

Given Information:

Selling price of four foot furniture is $120, Six foot furniture is $160 and Eight foot furniture is $200.

FIFO cost of four foot furniture is $84, six foot furniture is $94 and eight foot furniture is $150.

Current replacement cost of four foot furniture is $72, six foot furniture is $88 and eight foot furniture is $125.

Disposal cost of four foot furniture is $18, six foot furniture is $25 and eight foot furniture is $20.

Normal profit on four foot furniture is 20%, on six foot furniture is 25% and on eight foot furniture is 30%.

Units in ending inventory in four foot furniture are 1,000 units; in six foot furniture is 2,100 units and in eight foot furniture is 900 units.

b.

To determine

To prepare: Journal entry to record written down value using indirect method.

c.

To determine

Carrying value of the inventory with LCM rule using total inventory basis.

d.

To determine

To prepare: Journal entry to record written down LCM using direct method is as follows: