Alfalfa Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: $\begin{array}{rrr}&&\text { Market }\
\text { Product } & \text { Cost } & \text { value }\
\text { A } & \$ 112,000 & \$ 120,000 \
\text { B } & 80,000 & 76,000 \
\text { C } & 155,000 & 162,000
\end{array}$ If Alfalfa applies the LCM basis, the value of the inventory reported on the balance sheet would be

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market rule requires inventory to be reported at the lower of its cost or market value. For Product A, the cost is lower ($112,000). For Product B, the market value is lower ($76,000). For Product C, the cost is lower ($155,000). Therefore, the total inventory value is $112,000 + $76,000 + $155,000 = $343,000.

Alfalfa Company Developed the Following Information About Its Inventories in Applying