Lower of cost or market (LCM): Lower of cost or market concept states that the company must record the lower of the original cost or its current market value to the inventory cost after comparing the market value of each item with its cost. Lower of cost or market rule is generally applied when the inventories are stored for a long time or has become obsolete or when there is declining trend in the market prices. To Compute: The lower of cost or market (LCM) for the Office Necessities or the inventory applied separately to each item after comparing the market value of each item with its cost.

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Chapter 6, Problem 5PSB

To determine

Concept Introduction:

Lower of cost or market (LCM):

Lower of cost or market concept states that the company must record the lower of the original cost or its current market value to the inventory cost after comparing the market value of each item with its cost. Lower of cost or market rule is generally applied when the inventories are stored for a long time or has become obsolete or when there is declining trend in the market prices.

To Compute:

The lower of cost or market (LCM) for the Office Necessities or the inventory applied separately to each item after comparing the market value of each item with its cost.

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