Misty Inc.had 20,000 units of ending inventory that were recorded at their cost of $5.00 per unit using the first-in,first-out (FIFO)method.The current replacement cost is $4.25 per unit.Which of the following amounts would be reported as Ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule?

Question

Quizplus · Accepted Answer

According to the lower-of-cost-or-market rule, inventory should be valued at the lower of its cost or market value. In this case, the market value of the inventory is $4.25 per unit, which is lower than the cost of $5.00 per unit.

To calculate the ending merchandise inventory using the lower-of-cost-or-market rule, we need to multiply the number of units by the lower of cost or market value.

So, the ending merchandise inventory using the lower-of-cost-or-market rule would be:

20,000 units x $4.25 per unit = $85,000

Therefore, the best choice is D, which is $85,000.

Misty Inchad 20,000 Units of Ending Inventory That Were Recorded at at Their