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 | 69 | $ | 20 | $ | 23 | |||||||
| B | 99 | 48 | 38 | |||||||||
| C | 29 | 60 | 56 | |||||||||
| D | 89 | 38 | 33 | |||||||||
| E | 369 | 13 | 18 | |||||||||
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.
Total Cost:
Item A: 69 × $20 = $1,380
Item B: 99 × $48 = $4,752
Item C: 29 × $60 = $1,740
Item D: 89 × $38 = $3,382
Item E: 369 × $13 = $4,797
Total Market:
Item A: 69 × $23 = $1,587
Item B: 99 × $38 = $3,762
Item C: 29 × $56 = $1,624
Item D: 89 × $33 = $2,937
Item E: 369 × $18 = $6,642
Inventory valuation that should be used (LCM) = $14,500
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