Lower of cost or market (Learning Objective 4) 10–15 min.

Due to a nationwide recession, Liquidation World’s merchandise inventory is gathering dust. It is now October 31, 2014, and the $189,400 that Liquidation World paid for its ending inventory is $13,200 higher than current replacement cost. Before any adjustments at the end of the period, Liquidation World’s Cost of Goods Sold account has a balance of $728,600. Liquidation World uses lower of cost or market to value its ending inventory.

Requirements 1. What amount should Liquidation World report for inventory on the balance sheet?

2. What amount should Liquidation World report for cost of goods sold?

3. Journalize any required entries.

AppendixLO1