Page 1 of 2 ACC 301 Lower-of-Cost-or-Market Example Fall 2021 Assume a company had the following three products at December 31, 2021 Current Estimated Cost to Qty. Item Cost Replacement Sell Selling Cost Price 1 587 $85 515 $120 B 558 5 510 $60 $ 80 541 7 57 $35 546 Normal Profit Margin (Percent of Selling Price) 2016 10% 10% Required: 1. Using the lower-of-cost-or-market approach (LCM), calculate the ceiling, floor and market of each item Item A Ceilings Floor $ Markets Item B Ceiling: 5 Floor $ Market $ Item C Ceiling: $ Floor $ Markets 2. Calculate the inventory value that should appear on the December 31, 2021 Balance Sheet using Individual item basis: $ a b. Total basis: $ Page 2 of 2 Lower-of-Cost-or-Market Example - Continued: 3. Assume a company has a perpetual inventory system and uses an "allowance account to record its inventory adjustments to market. Prepare the adjusting journal entries, if any, to record inventory at market under each of the following approaches: a) Cost-of-goods-sold method Individual items basis: Total basis b) Loss method Individual items basis: Total basis