The accountants for QEE Systems use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP.The accountants have gathered the following information: At what amount will inventory will be reported on the balance sheet?

Question

The accountants for QEE Systems use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP.The accountants have gathered the following information:  At what amount will inventory will be reported on the balance sheet?

Quizplus · Accepted Answer

Under LCM method, inventory is valued at the lower of cost or market value. 
Cost of inventory = 100,000 + 50,000 + 35,000 + 30,000 = $215,000
Market value of inventory = 100,000 + 50,000 + 30,000 + 20,000 = $200,000
Since market value is lower than cost, inventory will be reported on the balance sheet at market value, which is $135,000 (the total of the items with market value). Therefore, the correct answer is C.

The Accountants for QEE Systems Use the Lower of Cost