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. $\begin{array} { | l | l | l | l | }
\hline \text { Item } & \text { Inventory Quantity } & \text { Unit Cost Price } & \text { Unit Market Price } \
\hline \text { Product C } & 420 & \$ 6 & \$ 5 \
\hline \text { Product D } & 370 & 12 & 14 \
\hline
\end{array}$
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. $\begin{array} { | l | l | l | l | } 
\hline \text { Item } & \text { Inventory Quantity } & \text { Unit Cost Price } & \text { Unit Market Price } \
\hline \text { Product C } & 420 & \$ 6 & \$ 5 \
\hline \text { Product D } & 370 & 12 & 14 \
\hline
\end{array}$
A) $6,960
B) $7,700
C) $6,540
D) $7,280

Quizplus · Accepted Answer

The lower-of-cost-or-market method values inventory at the lower of the cost or market price. For Product C, the market price is lower, so use $5 per unit. For Product D, the cost price is lower, so use $12 per unit. Total value = (420 units * $5) + (370 units * $12) = $2,100 + $4,440 = $6,540.

If a Company Values Inventory at the Lower of Cost