Mallard Auto Parts,Inc.has on hand 1,000 fenders for 1953 Studebakers.Mallard purchased the fenders in 1965 for $30 each and the selling price is $400 each.Only rarely does Mallard sell a Studebaker fender and it is highly unlikely that more than 100 of the remaining fenders will ever be sold.However,Mallard has ample storage space and feels an obligation to Studebaker owners.Therefore,the company will not salvage the fenders and will continue to sell them for $400 each.Scrap value of the fenders is $5 each.Under the lower of cost or market inventory method:

Question

Quizplus · Accepted Answer

Under the lower of cost or market inventory method,inventories can only be written down if the taxpayer reduces the asking price for the goods.Therefore,Mallard Auto Parts,Inc.should value the fenders at cost.See the discussion of Thor Power Tool Co.in Chapter 18.