Sandals Company is preparing the annual financial statements dated December 31.

Question

Sandals Company is preparing the annual financial statements dated December 31. Ending inventory information about the four major items stocked for regular sale follows Unit Cost Quantity When Market Value on Hand Acquire(FIFO) Product Line Air Flow Blister Buster Coolonite Dudesly 40 100 35 50 $12 40 65 34 at Year-End $14 38 60 39 Required 1. Compute the amount that should be reported for the ending inventory using the LCM rule applied to each item Ending Inventory 2. How will the write-down of inventory to lower of cost or market affect the company's expenses reported for the year ended December 31? Cost of goods sold will be

Explanation / Answer

1) Calculate ending inventory under LCM :

b) cost of goods sold will be decline by $375

Unit Cost Market value Value under LCM Air flow 40 480 560 480 Blister buster 100 4000 3800 3800 Coolonite 35 2275 2100 2100 Dudesly 50 1700 1950 1700 Total 8455 8410 8080

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