If the cost of an item of inventory is $70, the current replacement cost is $65, and the sales price is $85, the amount included in inventory according to the lower-of-cost-or-market method is:
A) $65.
B) $70.
C) $85.
D) $160.

Question

Quizplus · Accepted Answer

According to the lower-of-cost-or-market method, the inventory value should be reported at the lower of cost or market. In this case, the market price is $65 which is lower than the cost of $70. Therefore, the inventory value should be reported as $65.

If the Cost of an Item of Inventory Is $70