If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole.
A) $6,960
B) $7,700
C) $6,540
D) $7,280

Question

If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. 
A) $6,960 
B) $7,700 
C) $6,540 
D) $7,280

Quizplus · Accepted Answer

The lower of cost or market method takes the lower value between the cost of inventory and the current market value. 
In this case, the cost of the merchandise inventory is $6,960 and the market value is lower at $6,540. Therefore, the value of merchandise inventory on the balance sheet would be $6,540.

If a Company Values Inventory at the Lower of Cost