A local Chevrolet dealership carries the following types of vehicles:

        

Inventory Items	Quantity	Cost per Unit	Market, (replacement cost) per Unit	Lower-of-Cost-or-Market
Vans	3	$22,000	$20,000	__________
Trucks	6	17,000	16,000	__________
2-door sedans	2	12,000	14,000	__________
4-door sedans	7	16,000	19,000	__________
Sports cars	3	32,000	35,000	__________
SUVs	5	28,000	23,000	__________
				__________

Because of recent increases in gasoline prices, the car dealership has noticed a reduced demand for its SUVs, vans, and trucks.

Required:

1. Compute the total cost of the entire inventory.

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2. Determine whether each inventory item would be reported at cost or market. Multiply the quantity of each inventory item by the appropriate cost or market amount and place the total in the “Lower-of-Cost-or-Market” column. Then determine the total for that column.

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3. Compare your answers in Requirement 1 and Requirement 2 and then record any necessary adjustment to write down inventory from cost to market value.

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4. Discuss the financial statement effects of using lower-of-cost-or-market to report inventory.