Answer:
R.A. Mona's Pet Shop
Lower of Cost or Market (LCM):
= $2,200
Explanation:
a) Data and Calculations:
Mona’s Pet Store
Per unit
Inventory Items Units Cost Market Total Cost Total Market
Puppies 11 50 100 $550
Turtles 12 25 20 $240
Fish 40 8 7 280
Parrots 10 100 250 1,000
Cats 26 10 5 130
Total cost $1,550 $650 = $2,200
b) The Pet Shop will report a total inventory value of $2,200 based on the Lower of Cost or Market Price computed above. The choice to report inventory value based on the LCM ensures that the value of inventory is not overstated above its net realizable value. This practice accords with conservative method of accounting.
