Problem
Sandals Company is preparing the annual financial statements dated December 31. Ending inventory information about the four major items stocked for regular sale follows:
|
Product Line
|
Quantity
on Hand
|
Unit Cost When Acquire(FIFO)
|
Market Value
at Year-End
|
|
Air Flow
|
|
35
|
|
$
|
15
|
|
$
|
17
|
|
|
Blister Buster
|
|
75
|
|
|
38
|
|
|
36
|
|
|
Coolonite
|
|
34
|
|
|
65
|
|
|
60
|
|
|
Dudesly
|
|
35
|
|
|
30
|
|
|
35
|
|
Required:
1. Compute the amount that should be reported for the ending inventory using the LCM rule applied to each item.
2. How will the write-down of inventory to lower of cost or market affect the company's expenses reported for the year ended December 31?