Moore Company purchased an item for inventory that cost $20 per unit and was priced to sell at $30. It was determined that the replacement cost is $18 per unit. Using the lower of cost or market rule, what amount should be reported on the balance sheet for inventory?
A) $18.
B) $20.
C)$7.
D)$5.

Question

Quizplus · Accepted Answer

According to the lower of cost or market (LCM) rule, inventory should be valued at the lower of its cost or market value. In this case, the cost of the item is $20, but the market value (replacement cost) is $18, which is lower. Therefore, the inventory should be reported on the balance sheet at $18 per unit. Answer A) is correct. Answers B), C), and D) are all incorrect.

Moore Company Purchased an Item for Inventory That Cost $20