A physical inventory of Liverpool Company taken at December 31 reveals the following. Per Unit ItemUnitsCostMarket Car audio equipment Speakers343$98 $106 Stereos258 119 108 Amplifiers324 94 103 Subwoofers202 60 49 Security equipment Alarms478 158 133 Locks289 101 92 Cameras210 318 330 Binocular equipment Tripods183 78 92 Stabilizers168 105 113 Required: 1. Calculate 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.

Answer is explained below.

Explanation:

Items                  Per Unit           Total  LCM Applied to

         UnitsCostMarketCostMarketIndividual Items

Car audio equipment      

Speakers    3439810633,61436,35833,614

Stereos25811910830,70227,86427,864

Amplifiers3249410330,45633,37230,456

Subwoofers202604912,1209,8989,898

Security Equipment    -  -    

Alarms47815813375,52463,57463,574

Lock2891019229,18926,58826,588

Cameras21031833066,78069,30066,780

Binocular Equipment    -  -    

Tripods183789214,27416,83614,274

Stabilizers16810511317,64018,98417,640

              Cost                   Market          Individual Items

TOTAL                3,10,299      3,02,774    2,90,688

Journal Entry to record the Adjustment for Inventory      

Account Tittles and Explanations                    Debit ($)Credit ($)     Cost of Goods Sold A/c                              19,611      

To Inventory A/c                                                           19,611    

[Entry to Write down the inventory

value to the market value] [$310,299 – 290,688]      

15 pounds of apples and 6 cups of flour

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