Jonas Company's inventory has the following values:
Cost........................................$1,000
Estimated selling price............1,500
Selling expenses.......................600
Under the lower-of-cost-or-market method, Jonas Company's inventory will be valued at:
A) $500.
B) $900.
C) $1,500.
D) $1,000.

Question

Jonas Company's inventory has the following values: 
Cost........................................$1,000
Estimated selling price............1,500
Selling expenses.......................600
Under the lower-of-cost-or-market method, Jonas Company's inventory will be valued at:
A) $500.
B) $900.
C) $1,500.
D) $1,000.

Quizplus · Accepted Answer

Under the lower-of-cost-or-market method, inventory is valued at the lower of its cost or market value. In this case, the cost is $1,000 and the market value is the estimated selling price minus the selling expenses ($1,500 - $600 = $900). Therefore, Jonas Company's inventory will be valued at $900.

Jonas Company's Inventory Has the Following Values