Given the following data: $\begin{array} { | l | r | }
\hline\text { Ending inventory at cost } & \$ 62,000 \
\hline \text { Ending inventory at net realizable value } & 61,000 \
\hline \begin{array} { c }
\text { Cost of goods sold (before consideration of the } \
\text { lower-of-cost-and-net-realizable-value rule) }
\end{array} & 104,000 \
\hline
\end{array}$ Which of the following depicts the proper account balance after the application of the lower-of-cost-and-net realizable value rule?

Question

Given the following data: $\begin{array} { | l | r | } 
\hline\text { Ending inventory at cost } & \$ 62,000 \
\hline \text { Ending inventory at net realizable value } & 61,000 \
\hline \begin{array} { c } 
\text { Cost of goods sold (before consideration of the } \
\text { lower-of-cost-and-net-realizable-value rule) }
\end{array} & 104,000 \
\hline
\end{array}$ Which of the following depicts the proper account balance after the application of the lower-of-cost-and-net realizable value rule?

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. Here, the ending inventory's cost is $62,000, but its net realizable value is $61,000. Therefore, the inventory should be written down to $61,000, increasing the cost of goods sold by $1,000 (from $104,000 to $105,000).

Given the Following Data Which of the Following Depicts the Proper Account Balance After