Chapter 10, Problem 10.9P

Lower of Cost or Market. O'Sullivan Corporation provided the following information regarding its ending inventory for the current year O’Sullivan manufactures three types of athletic shoes Selling costs are 10% of the selling price The company values its ending inventory at the lower of LIFO cost or market.

There are 1,000 units of each product in inventory.

Product	LIFO Cost	Current Replacement Cost	Selling Price	Normal Profit Margin
Assurant	$210	$225	$260	30%
Biglow	250	220	280	20%
Cartata	170	140	200	15%

*As a percentage of selling price.

Required

1. a. Compute the amount of write-down, if any, on both an individual and a total inventory basis.
2. b. Prepare any journal entries necessary to reflect the inventory at lower of cost or market assuming that O’Sullivan uses the indirect method.
3. c. Repeat requirement (b) assuming that O’Sullivan uses the direct method to record any required write-down to lower of cost or market.