What are the year end steps for applying the LCM method?
Answer:
1. perform any other necessary adjustments on inventory account (DVL must have adjusted the FIFO inventory ending to DVL to account for agreeing to physical count).
2. gather info - sales price, cost to complete and disposal costs, PM, existing costs, replacement costs, etc.
3. compute ceiling and floor
4. determine designated market value by comparing true replacement cost to ceiling and floor amounts.
5. compare designated market value to existing costs.
6. if designated market value is < existing cost = write down.
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