Piggly Wiggly Sales had six CD players in inventory on December 31. They were purchased in November for $170 each. A quoted price received from the supplier on December 31 shows the CD players now cost $175 each. Piggly Wiggly has marked each player to sell for $320. Using the lower-of-cost-and-net-realizable-value rule, the ending inventory of CD players should be shown at:

Question

Quizplus · Accepted Answer

The lower-of-cost-and-net-realizable-value rule requires that inventory be reported at the lower of its historical cost or its net realizable value. The historical cost of the CD players is $170 each, and since there are six of them, the total cost is $170 * 6 = $1,020. The net realizable value would be the selling price minus any costs to sell, but since those aren't provided, we only consider the selling price of $320 each or other relevant costs. However, the rule focuses on comparing the cost to net realizable value, and in this case, the cost is the lower amount. Therefore, the inventory should be reported at its cost of $1,020.

Piggly Wiggly Sales Had Six CD Players in Inventory on December