A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

Question

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According to the lower of cost or market rule, inventory should be valued at the lower of its cost or its market value. In this case, the market value is $217,000, which is lower than the cost of $241,000. Therefore, the inventory should be written down to its market value of $217,000.

A Company Has Inventory with a Market Value of $217,000