If the cost of an item of inventory is $50 and the current replacement cost is $57, the amount included in inventory according to the lower of cost or market is
A) $7
B) $50
C) $57
D) $107

Question

Quizplus · Accepted Answer

According to the lower of cost or market (LCM) rule, the inventory of an item should be recorded at the lower of its cost or current market value. In this case, since the cost of the item is lower than its replacement cost, the inventory amount would be recorded at the cost price of $50. Therefore, the correct answer is B.

If the Cost of an Item of Inventory Is $50