On December 31,20A,the end of the accounting period,Dunn Company has on hand 5,000 units of a resale item which cost $21 per unit when purchased on June 15,20A.The selling price is $35 per unit.On November 30,20A,the quoted purchase cost of this item was $22 per unit; whereas on December 30,20A,the cost had dropped to $20 per unit.In view of the large quantity of units on hand,no purchases are anticipated in the next six to nine months.At what inventory amount should the 5,000 units be reported?

Question

Quizplus · Accepted Answer

The inventory should be reported at the lower of cost or market. The original cost was $21 per unit, but the market cost on December 30 was $20 per unit. Therefore, the inventory should be reported at $20 per unit, totaling $100,000 (5,000 units x $20).

On December 31,20A,the End of the Accounting Period,Dunn Company Has