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, 2018, before releasing its financial statements for the year:

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, 2018, is $61,300.

Requirements

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

2. What value for Inventory would Mid Valley Sporting Goods, Inc., report on the balance sheet at December 31, 2018?

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

Ending Inventory
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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...