Meredith's Appliance Store has the following data for the items in its inventory at the end of the accounting period:

Required:

1. Compute the carrying value of Meredith's ending inventory using the lower of cost or market rule applied on an item-by-item basis.

2. Prepare the journal entry required to value the inventory at lower of cost or market.

3. What is the conceptual justification for valuing inventory at the lower of cost or market?

Transcribed Image Text:

Historical Cost per Unit Selling Price per Unit Disposal Number Item of Units Costs Window air conditioner 25 22 $45 $180 $150 225 420 220 180 210 230 450 190 Dishwasher Refrigerator 20 15 28 18 15 Microwave Washer (clothing) Dryer (clothing) 260 275 40 50