Home Furnishings reports inventory using the lower-of-cost-or-market method. Below is information related to its year-end inventory.
Inventory Quantity Cost Market
Furniture..........100...........$ 75..................$ 90
Electronics..........40............300..................250
Required:
1. Calculate ending inventory under lower-of-cost-or-market.
2. Record any necessary adjustment to inventory.
3. Explain the impact of the adjustment in the financial statements.