Babal Inc.is a wholesaler of electronics.It purchased 1,200 units of Product X for $600 each during 2022.The selling price during the year was $800 per unit.At year end, it had 200 units on hand and due to changes in technology, the selling price will have to be reduced by 35% in order to sell them.The value of each unit of Product X for the year-end inventory presentation should be
A)$600.
B)-$600.
C)$280.
D)$520.

Question

Quizplus · Accepted Answer

The value of each unit of Product X for year-end inventory should be $520. This is calculated by reducing the original selling price of $800 by 35%, which equals $280. Subtracting this reduction from the original selling price ($800 - $280) gives us $520. This reflects the lower of cost or market rule, where inventory is reported at the lower of its cost ($600) or its market value ($520).

Babal IncIs a Wholesaler of Electronics