“There are many interesting theoretical and practical issues surrounding the application of the lower of cost or market (LCM) procedure in the valuation of inventories. These issues include the mechanics of recording the reduction in inventory value and the presentation of the effect in the financial statements. The purpose of this paper is to explore these issues in greater depth than is typically done in most intermediate accounting textbooks. In addition, an Excel spreadsheet is provided which can be used to help the student understand the issues involved.
This article is from the Accounting Instructor’s Resource, an electronic journal that provides teaching tips and insights to those who teach accounting and other business courses.”
Kennard S. Brackney, Ph.D., Appalachian State University
Philip R. Witmer, Ph.D., Appalachian State University