Your company has 500 units in inventory that had been purchased for $12 each and that would currently cost $15 to replace.Your supplier has just announced the cost of these goods is rising to $16.50.
A)Your company should make no adjustments to the inventory account.
B)Your company should adjust the inventory account using the lower of the recent market values,which is $15.
C)Your company should adjust the inventory account using the cost,which is $12.00.
D)Your company should adjust the inventory account using the average of the recent market values,which is $14.50.

Question

Quizplus · Accepted Answer

Under the lower of cost or market rule, inventory should be recorded at the lower of its historical cost or current market value. Since the historical cost ($12) is lower than the current market value ($15), no adjustment is needed.

Your Company Has 500 Units in Inventory That Had Been