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Chapter 5: 5PSA_1 (page 266)

A physical inventory of Liverpool Company taken at December 31 reveals the following.
Item
Units
Cost per unit
Market per unit
Car audio equipment
Speaker
345
\(90
\)98
Stereos
260
111
100
Amplifiers
326
86
95
Subwoofers
204
52
41
Security equipment
Alarms
480
150
125
Locks
291
93
84
Cameras
212
310
322
Binocular equipment
Tripods
185
70
84
Stabilizers
170
97
105
Required
Compute the lower of cost or market for the inventory applied separately to each item.

Short Answer

Expert verified

Total inventory under LCM is$273,057.

Step by step solution

01

Definition of Historical Cost

Historical cost refers to the amount initially paid by the business entity for acquiring the inventory, or any asset is known as historical cost.

02

Calculation of value of inventory

Item	Units	X	LCM	=	Total cost
Car audio equipment
Speaker	345	X	$90	=	$31,050
Stereos	260	X	$100	=	$26,000
Amplifiers	326	X	$86	=	$28,036
Subwoofers	204	X	$41	=	$8,364
Security equipment
Alarms	480	X	$125	=	60,000
Locks	291	X	$84	=	24,444
Cameras	212	X	$310	=	65,720
Binocular equipment
Tripods	185	X	$70	=	12,950
Stabilizers	170	X	$97	=	16,490
Total	$273,054

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Most popular questions from this chapter

Refer to the information in Exercise 5-7 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) FIFO and (b) LIFO. Then (c) compute the gross margin for each method.

Identify the inventory costing method best described by each of the following separate statements. Assume a period of increasing costs.

_____3. Provides a tax advantage (deferral) to a corporation when costs are rising.

The records of Alaska Company provide the following information for the year ended December 31.

	At Cost	At Retail
Jan 1 beginning inventory	\(469,010	\)928,950
Cost of Goods purchased	3,376,050	6,381,050
Sales		5,595,800
Sales return		42,800

Required

A year-end physical inventory at retail prices yields a total inventory of $1,686,900. Prepare a calculation showing the company’s loss from shrinkage at cost and at retail.

Aloha Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, the May 9 sale consisted of 80 units from beginning inventory and 100 units from the May 6 purchase; the May 30 sale consisted of 200 units from the May 6 purchase and 100 units from the May 25 purchase.)

Date	Activities	Units acquired at cost	Units sold at retail
May 1	Beginning inventory	150 units @ \(300.00 per unit
May 6	Purchase	350 units @ \)350.00 per unit
May 9	Sales		180 units @ \(1,200.00 per unit
May 17	Purchase	80 units @ \)450.00 per unit
May 25	Purchase	100 units @ \(458.00 per unit
May 30	Sales		300 units @ \)1,400.00 per unit
		680 units	480 units

Required

Analysis Component

5. If the company’s manager earns a bonus based on a percent of gross profit, which method of inventory costing will the manager likely prefer?

Refer to the information in Exercise 5-3 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO. (Round per unit costs and inventory amounts to cents.) For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

See all solutions

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