Mid Valley Sporting Goods, Inc., uses the LIFO inventory method and values its inventory using the lower-of-cost-or-market

Question:

Mid Valley Sporting Goods, Inc., uses the LIFO inventory method and values its inventory using the lower-of-cost-or-market (LCM) rule. Mid Valley Sporting Goods, Inc., has the following account balances at December 31, 2016, prior to releasing the financial statements for the year:

Cost of Goods Sold Sales Revenue Inventory Beg Bal 41,800 End Bal 62,700l Bal Bal 572,300 880,400

The accountant for Mid Valley Sporting Goods, Inc., has determined that the replacement cost (current market value) of the ending inventory as of December 31, 2016, is $61,300.

Requirements

1. Which accounting principle or concept is most relevant to Mid Valley Sporting Goods, Inc.’s decision to utilize LCM?

2. What value would Mid Valley Sporting Goods, Inc., report on the balance sheet at December 31, 2016, for inventory?

3. Prepare any adjusting journal entry required from the information given?

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