The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?

Question

Quizplus · Accepted Answer

Inventory should be recorded at the lower of cost or market value. In this case, the cost is $85,000 and the market value (current replacement cost) is $54,500. Therefore, the inventory should be recorded at $54,500, which is the lower amount.

The Craig-Doran Partnership Owns Inventory That Was Purchased for $85,000