A company sells four products: I,II,III,and IV.The company values all inventories using the lower-of-cost-or-market procedure.The company has consistently experienced a profit margin of 20 percent of sales and expects this rate to hold for the future.Additional information,shown below,is available for the most recent year as of December 31.

-See information regarding the four products above.Using the lower-of-cost-or-market procedure,what is the reported inventory value at December 31 for one unit of Product II?

Question

A company sells four products: I,II,III,and IV.The company values all inventories using the lower-of-cost-or-market procedure.The company has consistently experienced a profit margin of 20 percent of sales and expects this rate to hold for the future.Additional information,shown below,is available for the most recent year as of December 31.
 
-See information regarding the four products above.Using the lower-of-cost-or-market procedure,what is the reported inventory value at December 31 for one unit of Product II?

Quizplus · Accepted Answer

The lower-of-cost-or-market rule requires reporting the inventory at the lower of its historical cost or its current market value. For Product II, if the cost is higher than the market value, the inventory should be reported at the market value. Given the options, $70 is the only value that represents a potential market value lower than cost, making it the correct choice.

A Company Sells Four Products: I,II,III,and IV