Green Leaf Company had the following information available on December 31: Management applies the LCM rule on the basis of inventory category and includes wheelbarrows and hoses in the large implement category and shovels and gloves in the small implement category.What is the write-down required?
A)$864.
B)$556.
C)$576.
D)$710.

Question

Green Leaf Company had the following information available on December 31:  Management applies the LCM rule on the basis of inventory category and includes wheelbarrows and hoses in the large implement category and shovels and gloves in the small implement category.What is the write-down required?
A)$864. 
B)$556. 
C)$576. 
D)$710.

Quizplus · Accepted Answer

The LCM (Lower of Cost or Market) rule applies to inventory categories, and the company has two categories: large implements (wheelbarrows and hoses) and small implements (shovels and gloves). 
For each category, the market value is determined by finding the replacement cost, and the cost of the inventory items is compared to this market value. If the cost is higher, then no write-down is required. If the cost is lower, then the difference between cost and market value is the write-down required. 
For the large implement category:
- Cost of inventory on hand = $8,700 
- Replacement cost (market value) = $8,500 
Since the cost is higher than the market value, no write-down is required. 
For the small implement category: 
- Cost of inventory on hand = $4,200 
- Replacement cost (market value) = $3,800 
Since the cost is higher than the market value, no write-down is required. 
Therefore, the total write-down required is:
$0 (for large implements) + $576 (for small implements) = $576. 
So, option C is the best choice.

Green Leaf Company Had the Following Information Available on December