In applying the lower of cost and net realizable value rule,the inventory of skis would be valued at:
A)$162,000.
B)$128,000.
C)$120,000.
D)$180,000.

Question

Quizplus · Accepted Answer

The lower of cost and net realizable value rule states that inventory should be valued at the lower of its cost or its net realizable value (the estimated selling price minus the cost of completing and disposing). The cost of the skis inventory is $128,000 ($100,000 + $28,000) as given in the question. The net realizable value is $120,000 ($150,000 - $30,000), which is lower than the cost. Therefore, the inventory of skis would be valued at $120,000, which is the lower of the cost and net realizable value. Hence, the best choice is B.

In Applying the Lower of Cost and Net Realizable Value