Lower of Cost or Market Yang Manufacturing sells a limited line of specially made products,...
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Accounting
Lower of Cost or Market
Yang Manufacturing sells a limited line of specially made products, using television advertising campaigns in large cities. At year end, Yang has the following data for its inventory:
Item
Number of Units
Historical Cost per Unit
Market Value per Unit
Phone
600
$24
$18
Stereo
180
177
190
Electric shaver
220
30
35
MP3 alarm clock
430
26
25
Handheld game system
570
40
19
Required:
1. Compute the carrying value of the ending inventory using the lower of cost or market rule applied on an item-by-item basis. $
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1. Compare actual cost of inventory to its market value. The lower amount is the value of inventory. If market value is lower, the inventory account is adjusted.
2. Prepare the journal entry required to value the inventory at lower of cost or market.
Cost of Goods Sold
Inventory
(Reduced inventory to market value)
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