Moore Company purchased an item for inventory that cost $20 per unit and was priced to sell at $30. It was determined that the disposal cost is $12 per unit. Using the lower of cost or net realizable value (LCM) rule, what amount should be reported on the balance sheet for inventory?
A)$18.
B)$20.
C)$10.
D)$8.

Question

Quizplus · Accepted Answer

The lower of cost or net realizable value (LCM) rule requires that inventory be reported at the lower of its cost or its net realizable value. Net realizable value is the estimated selling price of the inventory minus the estimated costs of completion and disposal. In this case, the net realizable value is $30 - $12 = $18. Since the net realizable value is lower than the cost of $20, the inventory should be reported at $18.

Moore Company Purchased an Item for Inventory That Cost $20