Murphy,Inc.had the following balances and transactions during 2017. $$\begin{array} { | l | l | }
\hline \text { Beginning Inventory } & 10 \text { units at } \$ 73 \
\hline \text { June 10 } & \text { Purchased } 20 \text { units at } \$ 82 \
\hline \text { December 30 } & \text { Sold 20 units } \
\hline \text { December 31 } & \text { Replacement cost } \$ 63 \
\hline
\end{array}$$ The company maintains its records of inventory on a perpetual basis using the last-in,first-out inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2017 using the lower-of-cost-or-market rule.

Question

Murphy,Inc.had the following balances and transactions during 2017. $$\begin{array} { | l | l | } 
\hline \text { Beginning Inventory } & 10 \text { units at } \$ 73 \
\hline \text { June 10 } & \text { Purchased } 20 \text { units at } \$ 82 \
\hline \text { December 30 } & \text { Sold 20 units } \
\hline \text { December 31 } & \text { Replacement cost } \$ 63 \
\hline
\end{array}$$ The company maintains its records of inventory on a perpetual basis using the last-in,first-out inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2017 using the lower-of-cost-or-market rule.

Quizplus · Accepted Answer

Under the LIFO method, the ending inventory consists of the oldest costs. The beginning inventory of 10 units at $73 each remains unsold. The lower-of-cost-or-market rule requires valuing inventory at the lower of its cost or market value. The cost is $730 (10 units x $73), and the market value is $630 (10 units x $63). Therefore, the ending inventory is valued at $630.

Murphy,Inc The Company Maintains Its Records of Inventory on a Perpetual