Reichart Company has four different categories of inventory. Quantity, cost, market value for each inventory category is shown below: The company carries inventory at lower-of-cost-or-market applied to the inventory in aggregate. The implementation of the lower-of-cost-or-market rule would:
A)increase assets and equity by $55.50.
B)reduce assets and equity by $101.00.
C)reduce assets and equity by $79.00.
D)None of these.

Question

Reichart Company has four different categories of inventory. Quantity, cost, market value for each inventory category is shown below:  The company carries inventory at lower-of-cost-or-market applied to the inventory in aggregate. The implementation of the lower-of-cost-or-market rule would:
A)increase assets and equity by $55.50. 
B)reduce assets and equity by $101.00. 
C)reduce assets and equity by $79.00. 
D)None of these.

Quizplus · Accepted Answer

968(220 x $4.40) + 806(130 x $6.20) + 1,000 (100 x $10.00) + 512.50(25 x $20.50) = $3,286.50 Total Cost; 1,012(220 x $4.60) + 780(130 x $6.00) + 925(100 x 9.25) + 625 (25 x $25.00) = $3,342 Total Market; Because market value, in aggregate, is higher than cost, no entry is necessary.

Reichart Company Has Four Different Categories of Inventory