Under the principle of lower-of-cost-or-market,when a company has 10 units of inventory A with market value of $50 and a cost of $60,what is the adjustment?

Question

Quizplus · Accepted Answer

Under the lower-of-cost-or-market principle, if the market value of inventory is lower than its cost, the inventory should be written down to the market value. In this case, the market value of 10 units of inventory A is $50, which is lower than its cost of $60. The adjustment should be recorded by debiting Cost of Goods Sold for the difference between the cost and the market value ($60 - $50 = $10/unit x 10 units = $100) and crediting Inventory for the same amount. Therefore, the correct answer is C.

Under the Principle of Lower-Of-Cost-Or-Market,when a Company Has 10 Units