Reporting Inventory at Lower of Cost or Market – Parson Company was formed on January 1, 2012, and is preparing the annual financial statements dated December 31, 2012. Ending inventory information about the four major items stocked for regular sale follows:
| ENDING INVENTORY, 2012 Don't use plagiarized sources. Get Your Custom Essay on what will be the effect of the write down of inventory to lower of cost or market on 555624 For $10/Page 0nly | |||
| Item | Quantity on Hand | Unit Cost When Acquired (FIFO) | Replacement Cost |
| A | 20 | $10 | $15 |
| B | 55 | 40 | 44 |
| C | 35 | 57 | 55 |
| D | 10 | 27 | 32 |
Required:
1. Compute the valuation that should be used for the 2012 ending inventory using the LCM rule applied on an item-by-item basis.
2. What will be the effect of the write-down of inventory to lower of cost or market on cost of goods sold for the year ended December 31, 2012?
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