Magic Carpets Inc. sells a full line of area rugs, from top quality to bargain basement. Economic conditions have hit the textile industry, and the accountant for Magic Carpets is concerned that the rug inventory might not be worth the amount Magic paid. The following is information about three lines of rugs.

a. Determine lower of cost or market for each type of rug.

b. Assume that Magic Carpets applies lower of cost or market to the individual types of rugs rather than to the entire stock of inventory as a whole. Determine if Magic Carpets has suffered a loss of value on its inventory, and if so, the amount of that loss.

Number in ent Sales Cost to Sel Inventory Replacement Sales Price $350 220 110 Cost High Flyers Midflight Under the Radar $230 150 100 Cost $240 120 100 $40 25 20 80 125 165