A company had been selling its product for $20 per unit,but recently lowered the selling price to $15 per unit.The company's current inventory consists of 200 units purchased at $16 per unit.The replacement cost of this merchandise is currently $13 per unit.At what amount should the company's inventory be reported on the balance sheet under the lower of cost or market rule?
A)$2,600
B)$3,200
C)$3,000
D)$4,000

Question

Quizplus · Accepted Answer

Under the lower of cost or market rule, inventory is reported at the lower of its historical cost or market value. The historical cost is $16 per unit, and the market value is the replacement cost of $13 per unit. Therefore, the inventory should be reported at $13 per unit, totaling $2,600 (200 units x $13).

A Company Had Been Selling Its Product for $20 Per