Questions: A physical inventory of Liverpool Company taken at December 31 reveals the following. Item, Units, Cost, Market Car audio equipment Speakers, 340, 95, 103 Stereos, 255, 116, 105 Amplifiers, 321, 91, 100 Subwoofers, 199, 57, 46 Security equipment Alarms, 475, 155, 130 Locks, 286, 98, 89 Cameras, 207, 315, 327 Binocular equipment Tripods, 180, 75, 89 Stabilizers, 165, 102, 110 Required: 1. Compute the lower of cost or market for the inventory applied separately to each item. 2. If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to the Merchandise Inventory account. No, Date, General Journal, Debit, Credit , December 31, Cost of goods sold, , , , Merchandise inventory, ,

To address the requirements of the question, we need to compute the lower of cost or market (LCM) for each inventory item and then record any necessary adjustments to the Merchandise Inventory account if the market value is less than the recorded cost.

We will compare the cost and market value for each item and select the lower value.

| Item | Units | Cost per Unit | Market per Unit | Lower of Cost or Market per Unit | Total Lower of Cost or Market | |---------------|-------|---------------|-----------------|----------------------------------|-------------------------------| | Speakers | 340 | $95 | $103 | $95 | $32,300 | | Stereos | 255 | $116 | $105 | $105 | $26,775 | | Amplifiers | 321 | $91 | $100 | $91 | $29,211 | | Subwoofers | 199 | $57 | $46 | $46 | $9,154 | | Alarms | 475 | $155 | $130 | $130 | $61,750 | | Locks | 286 | $98 | $89 | $89 | $25,454 | | Cameras | 207 | $315 | $327 | $315 | $65,205 | | Tripods | 180 | $75 | $89 | $75 | $13,500 | | Stabilizers | 165 | $102 | $110 | $102 | $16,830 |

First, we need to calculate the total cost and the total lower of cost or market for the inventory:

• Total Cost:

  • Speakers: 340 units * $95 = $32,300
  • Stereos: 255 units * $116 = $29,580
  • Amplifiers: 321 units * $91 = $29,211
  • Subwoofers: 199 units * $57 = $11,343
  • Alarms: 475 units * $155 = $73,625
  • Locks: 286 units * $98 = $28,028
  • Cameras: 207 units * $315 = $65,205
  • Tripods: 180 units * $75 = $13,500
  • Stabilizers: 165 units * $102 = $16,830
  • Total Cost = $299,622

• Total Lower of Cost or Market:

  • Speakers: $32,300
  • Stereos: $26,775
  • Amplifiers: $29,211
  • Subwoofers: $9,154
  • Alarms: $61,750
  • Locks: $25,454
  • Cameras: $65,205
  • Tripods: $13,500
  • Stabilizers: $16,830
  • Total Lower of Cost or Market = $280,179

The LCM adjustment is the difference between the total cost and the total lower of cost or market:

• LCM Adjustment = Total Cost - Total Lower of Cost or Market
• LCM Adjustment = $299,622 - $280,179 = $19,443

\begin{tabular}{|c|c|l|l|l|} \hline No & \multicolumn{1}{|c|}{ Date } & \multicolumn{1}{|c|}{ General Journal } & Debit & Credit \\ \hline 1 & December 31 & Cost of goods sold & $19,443 & \\ \hline 2 & & Merchandise inventory & & $19,443 \\ \hline \end{tabular}

This journal entry records the reduction in the value of the Merchandise Inventory to reflect the lower of cost or market value, with the corresponding expense recorded in the Cost of Goods Sold account.