Englehart Company sells two types of pumps. One is large and is for commercial use. The other is smaller and is used in residential swimming pools. The following inventory data is available for the month of March.

In addition to the above information, due to a downturn in the economy that has hit Englehart??s commercial customers especially hard, Englehart expects commercial pump prices from March 31 onward to be considerably different (and lower) than at the beginning of and during March. Englehart has developed the following additional information.

The normal profit margin is 16.67 percent of cost. Englehart uses the FIFO accounting method.Accounting(a) Determine the dollar amount that Englehart should report on its March 31 balance sheet for inventory. Assume Englehart applies lower-of-cost-or-market at the individual product level.(b) Repeat part (a) but assume Englehart applies lower-of-cost-or-market at the major category level. Englehart places both commercial and residential pumps into the same (and only) category.AnalysisWhich of the two approaches above (individual product level or major categories) for applying LCM do you think gives the financial statement reader better information?PrinciplesAssume that during April, the replacement cost of commercial pumps rebounds to $1,050 (assume this will be designated market value).(a) Briefly describe how Englehart will report in its April financial statements the inventory remaining from March 31.(b) Briefly describe the conceptual trade-offs inherent in the accounting in part(a).

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Price per Units Unit Total Residential Pumps Inventory at Feb. 28: $ 80,000 $ 400 200 Purchases: $ 450 $ 475 $ 500 March 10 500 $225,000 $190,000 $150,000 400 March 20 March 30 300 Sales: $ 540 $ 570 500 $270,000 $228,000 March 15 March 25 400 Inventory at March 31: 500 Commercial Pumps Inventory at Feb. 28: Purchases: $ 800 600 $480,000 600 $ 900 $ 950 $1,000 March 3 $540,000 $285,000 $500,000 March 12 300 500 March 21 Sales: March 18 900 $1,080 $1,140 $972,000 $684,000 March 29 600 Inventory at March 31: 500