Spam Control NBCNews.com Y The following information applies to the questions di

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Spam Control NBCNews.com Y The following information applies to the questions displayed below Harvey Company prepared its annual financial statements dated December 31, 2011 The company applies the FIFO Inventory costing method, however, the company neglected to apply LCM to the ending inventory The preliminary 2011 income statement follows Sales revenue s 296,000 Cost of goods sold Beginning inventory s 34,600 Goods available for sale Ending inventory (FIFO cost 66,794 Cost of goods sold 67,806 Gross profit Operating expenses 128.194 63,600 Pretax Income 64,594 22,608 Income tax expense (35%) Net income 41,986 Assume thet you have been asked to restate the 2011 financial statements to incorporate LCM. You have developed the following data relating to the 2011 ending inventory Cost Unit Cost Item Quantity Unit Total 3.210 $46$14,766 6.806 29766 15.456 S 3.6 5.6 21 A. 1660 7.260 36046 4.1 $ 66794 3

Explanation / Answer

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Valuation of ending inventory under LCM Item Quantity Total cost Total Market value LCM valuation (Lower of A and B) A    3,210 $14,766 $        11,556 $   11,556 B    1,660 $6,806 $          9,296 $     6,806 C    7,260 $29,766 $        15,246 $   15,246 D    3,360 $15,456 $        22,176 $   15,456 $   49,064 Item Quantity Market price per unit Total Market value A    3,210 $       3.60 $        11,556 B    1,660 $       5.60 $          9,296 C    7,260 $       2.10 $        15,246 D    3,360 $       6.60 $        22,176

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