ACCT 304 week 7 Discussions

ACCT 304  week 7 Discussions

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Inventories—LCM (graded)
Hello Class;

The lower-of-cost-or-market (LCM) approach was developed to avoid reporting inventory at an amount greater than the benefits it can provide. The LCM approach records losses in the period the value of the inventory drops below its cost instead of later in the period that the goods are ultimately sold.

Is this a conservative or an aggressive approach? What does GAAP say about LCM?

Inventory Errors (graded)
Hello Class;

It is discovered in 2013 that ending inventory from 2011 is understated.

What accounts will be affected by this understatement, and how will they be affected?

This is a situation that really happens. Start with the 2011 inventory being understated, and track the changes through the inventory account to 2013.