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 means that the inventory will be valued at whichever is lower between its cost and its current market value. In this case, the cost of the inventory is $7,200 and the market value is $6,540. Therefore, the value of merchandise inventory on the balance sheet will be $6,540, which is the lower value of the two. So, the correct option is C.

If a Company Values Inventory at the Lower of Cost