The Kidde Corporation uses the lower-of-cost-or-market method to value inventory.Data regarding the items in work-in-process inventory are presented below.

-See information regarding the Kidde Corporation above.When valuing the pens,the market value to be used in the lower-of-cost-or- market comparison is

Question

The Kidde Corporation uses the lower-of-cost-or-market method to value inventory.Data regarding the items in work-in-process inventory are presented below.
 
-See information regarding the Kidde Corporation above.When valuing the pens,the market value to be used in the lower-of-cost-or- market comparison is

Quizplus · Accepted Answer

The lower-of-cost-or-market rule requires comparing the market value of inventory to its cost and then reporting the inventory at the lower value. The market value is determined as the current replacement cost, not exceeding the net realizable value (ceiling) and not less than the net realizable value minus a normal profit margin (floor). Given the information, the correct market value to use is $16,800, which falls within the established ceiling and floor limits.

The Kidde Corporation Uses the Lower-Of-Cost-Or-Market Method to Value Inventory