Reporting Inventory at Lower of Cost or Market
Reporting Inventory at Lower of Cost or MarketSandals Company was formed on January 1, 2010, and is preparing the annual financial statements dated December 31, 2010. Ending inventory information about the four major items stocked for regular sale follows:Ending Inventory, 2010QuantityUnit Cost WhenMarket ValueProduct Lineon HandAcquired (FIFO)at Year-EndAir Flow20$12$14Blister Buster754038Coolonite355550Dudesly103035Required:1. Compute the amount that should be reported for the 2010 ending inventory using the LCM rule applied to each item.2. How will the write-down of inventory to lower of cost or market affect the company’s expenses reported for the year ended December 31, 2010?3. How would the methods used by Sandals Company to account for its inventory be affected by a switch from GAAP to IFRS?
