Jones company is preparing the annual financial statements dated december 31 of the current year. ending inventory information about the five major items stocked for regular sale follows: ending inventory, current year item quantity on hand unit cost when acquired (fifo) net realizable value (market) at year-end a 50 $ 15 $ 12 b 80 30 40 c 10 48 52 d 70 25 30 e 350 10 5 required: compute the valuation that should be used for the current year ending inventory using the lcm rule applied on an item-by-item basis.

The value of ending inventory under LCM rule on an  item by item basis is $ 7,370

Explanation:

Computation of ending inventory in LCM rule

Item       No of Units      Cost       NRV         Basis             Inventory valuation

a                      50             $ 15        $ 12          NRV                      $     600

b                      80             $ 30       $ 40         Cost                      $ 2,400

c                       10              $ 48      $ 52         Cost                      $    520

d                       70             $ 25      $ 30         Cost                     $   2.100

e                     350             $ 10       $ 5           NRV                      $   1,750

Total Inventory valuation                                                              $ 7,370