The accountant for Gentry Company prepared the following schedule of the company”s inventory at 2009 December 31, and used the LCM method applied to total inventory in determining cost of goods sold:
|
Item |
Quantity |
Unit Cost |
Unit Market |
|
Q |
4,200 |
$7.20 |
$7.20 |
|
R |
2,400 |
6 |
5.76 |
|
S |
5,400 |
4.8 |
4.56 |
|
T |
4,800 |
4.2 |
4.32 |
a. State whether this approach is an acceptable method of inventory measurement and show the calculations used to determine the amounts.
b. Compute the amount of the ending inventory using the LCM method on an item-by-item basis.
c. State the effect on net income in 2009 if the method in (b) was used rather than the method referred to in (a).