Basic inventory data for Eli Enterprises as of June 30 are p

Basic inventory data for Eli Enterprises as of June 30 are presented below: Item Quantity Unit Cost Unit Market Value Sporting Goods: Baseballs 20 $ 36 $ 32 Footballs 40 $110 $116 Basketballs 10 $ 40 $ 50 Electronics: CD Players 20 $164 $150 DVD Players 30 $116 $110 Assume Eli Enterprises applies the Lower of Cost or Market method for the inventory by major category. Determine the amount of inventory adjustment required at the end of the year.

Solution

Calculation of amount of inventory: Item Quantity (a) Cost Market value Lower of cost or market value (b) (a)*(b) Baseballs 20 36 32 32 640 Footballs 40 110 116 110 4400 Basketballs 10 40 50 40 400 CD Players 20 164 150 150 3000 DVD Players 30 116 110 110 3300 Total 11740