Low cost or market value

Question

Sadowski Video Center accumulates the following cost and market data at December 31.

Inventory Categories                      Cost Data               Market Data
Cameras                                       $10,007                   $11,067
Camcorders                                      8,702                       9,002
DVDs                                              11,073                       9,773

Compute the lower-of-cost-or-market valuation for Sadowski inventory.

The lower-of-cost-or-market value $
Entry field with incorrect answer now contains modified data
I am also having problems with figuring this out as well.

Thank you,
Shawna

Answer 1

In this case, the comparison is made by adding the inventory numbers, and comparing the two results.

 

We have:

Inventory Categories                      Cost Data               Market Data
Cameras                                       $10,007                   $11,067
Camcorders                                      8,702                       9,002
DVDs                                              11,073                       9,773

     Totals:                                     $29,782                   $29,842

 

As can be seen, the two values are very close, which is explained by the higher cost than market data for the DVDs.

 

In that case, the difference of $1,300 is a loss, and probably should be entered as an expense.

 

The only way for that condition to happen is that price changes in the market place occurred before the inventory was sold. So, that inventory relative to the market will be sold at a loss. In the case of electronic devices, once market prices are lowered, it is rare to see increases.