Rowan Company has four different categories of inventory.The quantity,cost,and market value for each of the inventory categories are as follows:

The company carries inventory at lower-of-cost-or-market applied to the entire stock of inventory in the aggregate.How would the implementation of the lower-of-cost-or-market rule impact the elements of the company's financial statements?

Question

Rowan Company has four different categories of inventory.The quantity,cost,and market value for each of the inventory categories are as follows:

The company carries inventory at lower-of-cost-or-market applied to the entire stock of inventory in the aggregate.How would the implementation of the lower-of-cost-or-market rule impact the elements of the company's financial statements?

Quizplus · Accepted Answer

Total cost = (220 × $4.40) + (130 × $6.20) + (100 × $10.00) + (25 × $20.50) = $3,286.50
Total market value = (220 × $4.60) + (130 × $6.00) + (100 × 9.25) + (25 × $25.00) = $3,342
Because the total market value is higher than total cost, no write-down is necessary.

Rowan Company Has Four Different Categories of Inventory