physical inventory
Question
A physical inventory of Liverpool Company taken at December 31 reveals the following.
| Per Unit | |||||
| Item | Units | Cost | Market | ||
| Audio equipment | |||||
| Receivers | 344 | $ | 99 | $ | 107 |
| CD players | 259 | 120 | 109 | ||
| MP3 players | 325 | 95 | 104 | ||
| Speakers | 203 | 61 | 50 | ||
| Video equipment | |||||
| Handheld LCDs | 479 | 159 | 134 | ||
| VCRs | 290 | 102 | 93 | ||
| Camcorders | 211 | 319 | 331 | ||
| Car audio equipment | |||||
| Satellite radios | 184 | 79 | 93 | ||
| CD/MP3 radios | 169 | 106 | 114 |
| Required: | |
| 1. | Calculate the lower of cost or market for the inventory applied separately to each item. |
| 2. | If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to the Merchandise Inventory account. |
| Navajo Company’s financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2014, is understated by $61,000, and inventory on December 31, 2015, is overstated by $31,000. |
| For Year Ended December 31 | 2014 | 2015 | 2016 | ||||
| (a) | Cost of goods sold | $ | 736,000 | $ | 966,000 | $ | 801,000 |
| (b) | Net income | 279,000 | 286,000 | 261,000 | |||
| (c) | Total current assets | 1,258,000 | 1,371,000 | 1,241,000 | |||
| (d) | Total equity | 1,398,000 | 1,591,000 | 1,256,000 | |||
| Required: | |
| 1. | For each key financial statement figure—(a), (b), (c), and (d) below—prepare a table to show the adjustments necessary to correct the reported amounts. (Amounts to be deducted must be entered with a minus sign.) |
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