E6-9 Digital Camera Shop Inc – Lower of cost or market LCM Valuation

E6-9 Digital Camera Shop Inc

In this tutorial, we will look how to calculate the Lower‐of‐cost‐or‐market (LCM) for a camera shop. The main principle here is to take the lowest valuation from either book costs or actual market valuation, as this will provide the most conservative asset valuation.

 
  • Student: Tyler Muffty
  • Textbook: Principles of Accounting II
  • Course: Accounting Week 3
 

E6-9 Digital Camera Shop Inc. uses the lower‐of‐cost‐or‐market basis for its inventory.

The following data are available at December 31.

Valuation Table

Cameras Units Cost per Unit Market per Unit Cost Total Market Total
Minolta 5 170 158 850 790
Canon 7 145 152 1015 1064
Light Meters
Vivitar 12 125 114 1500 1368
Kodak 10 120 135 1200 1350
LCM Valuation 4373

How to Calculate LCM

For each row in the table, simply take the lowest amount from either “Cost Total” or “Market Total” from each row (just ignore the higher value), then and add them together. In this case, it would be solved by LCM = 790+1015+1368+1200.

 

 

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