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#1 Calculate the lower of cost or market for the inventory applied separately to each item.

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#2 If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to the Merchandise Inventory account.

Per Unit Item Audio equipment Units Cost Market Receivers CD players MP3 players Speakers 355 $110 $100 270 131 121 336 106 214 96 62 51 Video equipment Handheld LCDs VCRs Camcorders 490 135 160 301 222332 320 94103 Car audio equipment Satellite radios CD/MP3 radios 195 180 115 107 94 80