A company had been selling its product for $20 per unit, but recently lowered the selling price to $15 per unit. The company's current inventory consists of 200 units purchased at $16 per unit. The replacement cost of this merchandise is currently $13 per unit. At what amount should the company's inventory to be reported on the balance sheet under the lower of cost or market rule?
A) $2,600
B) $3,200
C) $3,000
D) $4,000

Question

Quizplus · Accepted Answer

Under the lower of cost or market rule, inventory should be reported at the lower of its historical cost or market value. The historical cost is $16 per unit, and the market value is the replacement cost of $13 per unit. Therefore, the inventory should be reported at $13 per unit. 200 units x $13 = $2,600.

A Company Had Been Selling Its Product for $20 Per