Barley Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: $\begin{array}{ccc}
\text { Product } & \text { Cost } & \text { Market } \
\hline \text { A } & \$ 115,000 & \$ 120,000 \
\text { B } & 80,000 & 73,000 \
\text { C } & 158.000 &162,000 \
\end{array}$
If Barley applies the LCM basis the value of the inventory reported on the balance sheet would be
A) $346000.
B) $353000.
C) $355000.
D) $362000.

Question

Barley Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: $\begin{array}{ccc}
 \text { Product } & \text { Cost } & \text { Market } \
\hline \text { A } & \$ 115,000 & \$ 120,000 \
 \text { B } & 80,000 & 73,000 \
 \text { C } & 158.000 &162,000 \
\end{array}$
 If Barley applies the LCM basis the value of the inventory reported on the balance sheet would be
A) $346000.
B) $353000.
C) $355000.
D) $362000.

Quizplus · Accepted Answer

The lower-of-cost-or-market (LCM) method requires that inventory be reported at the lower of either its historical cost or its market value. For Product A, the cost is $115,000 and the market value is $120,000, so we use the cost of $115,000. For Product B, the cost is $80,000 and the market value is $73,000, so we use the market value of $73,000. For Product C, the cost is $158,000 and the market value is $162,000, so we use the cost of $158,000. Adding these together, $115,000 + $73,000 + $158,000 = $346,000.

Barley Company Developed the Following Information About Its Inventories in Applying