If a company values inventory at the lower of cost or market,which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole.
A)$6,960
B)$7,700
C)$6,540
D)$7,280

Question

If a company values inventory at the lower of cost or market,which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. 
A)$6,960 
B)$7,700 
C)$6,540 
D)$7,280

Quizplus · Accepted Answer

The lower-of-cost-or-market method means that the value of inventory on the balance sheet is either the cost or the market value, whichever is lower. The cost of inventory is $7,700, but the market value is only $6,540. Therefore, the value of merchandise inventory on the balance sheet is $6,540, which is choice C.

If a Company Values Inventory at the Lower of Cost