Sparks Furniture Company carries three lines of sofas.Information about the sofa inventory as of the end of its most recent fiscal year follows.If LCM/NRV is applied to each separate product line,what is the amount of the adjustment that must be made to the company's inventory? $$\begin{array} { l c c c }
\text { Product Line } & \text { Cost per Unit } & \text { Market Value per Urit } & \text { Quartity } \
\text { Rustic } & \$ 700 & \$ 725 & 190 \
\text { Mediterranearn } & 600 & 605 & 300 \
\text { Conternporary } & 950 & 820 & 275
\end{array}$$

Question

Sparks Furniture Company carries three lines of sofas.Information about the sofa inventory as of the end of its most recent fiscal year follows.If LCM/NRV is applied to each separate product line,what is the amount of the adjustment that must be made to the company's inventory? $$\begin{array} { l c c c } 
\text { Product Line } & \text { Cost per Unit } & \text { Market Value per Urit } & \text { Quartity } \
\text { Rustic } & \$ 700 & \$ 725 & 190 \
\text { Mediterranearn } & 600 & 605 & 300 \
\text { Conternporary } & 950 & 820 & 275
\end{array}$$

Quizplus · Accepted Answer

The correct answer is B because the LCM/NRV method requires that the inventory be valued at the lower of cost or net realizable value (NRV). In this case, the NRV for the Rustic line is $725, which is higher than the cost of $700. Therefore, no adjustment is needed for this line. The NRV for the Mediterranean line is $605, which is also higher than the cost of $600. Therefore, no adjustment is needed for this line either. However, the NRV for the Contemporary line is $820, which is lower than the cost of $950. Therefore, an adjustment of $130 per unit must be made to this line, resulting in a total adjustment of $130 * 275 = $35,750.

Sparks Furniture Company Carries Three Lines of Sofas A)$6,250 B)($35,750) C)($25,500) D)($29,500)

Sparks Furniture Company Carries Three Lines of Sofas A)$6,250
B)($35,750)
C)($25,500)
D)($29,500)