Mid Valley Sporting Goods, Inc., uses the LIFO inventory method and values its inventory using the lower-of-cost-or-market

Question:

Mid Valley Sporting Goods, Inc., uses the LIFO inventory method and values its inventory using the lower-of-cost-or-market (LCM) rule. Mid Valley Sporting Goods, Inc., has the following account balances at December 31, 2016, prior to releasing the financial statements for the year:

Cost of Goods Sold Sales Revenue Inventory Beg Bal 41,800 End Bal 62,700l Bal Bal 572,300 880,400

The accountant for Mid Valley Sporting Goods, Inc., has determined that the replacement cost (current market value) of the ending inventory as of December 31, 2016, is $61,300.

Requirements

1. Which accounting principle or concept is most relevant to Mid Valley Sporting Goods, Inc.’s decision to utilize LCM?

2. What value would Mid Valley Sporting Goods, Inc., report on the balance sheet at December 31, 2016, for inventory?

3. Prepare any adjusting journal entry required from the information given?

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Financial Accounting

ISBN: 978-0134436111

4th edition

Authors: Robert Kemp, Jeffrey Waybright

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