Lower of Cost or Market

Yang Manufacturing sells a limited line of specially made products, using television advertising campaigns in large cities. At year end, Yang has the following data for its inventory:

Item	Number of Units		Historical Cost per Unit		Market Value per Unit
Phone	600		$24		$18
Stereo	180		177		190
Electric shaver	220		30		35
MP3 alarm clock	430		26		25
Handheld game system	570		40		19

Required:

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

Feedback

1. Compare actual cost of inventory to its market value. The lower amount is the value of inventory. If market value is lower, the inventory account is adjusted.

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

	Cost of Goods Sold
	Inventory
	(Reduced inventory to market value)