Question

Jones Retail. had the following balances and transactions during 2017:

The company maintains its records of inventory on a perpetual basis using the first-in, first-out inventory costing method. Calculate the amount of ending Merchandise Inventory on December 31, 2017 using the lower-of-cost-or-market rule.

Supporting Materials

15 unitsat $75 Purchased 35 units at $84 Sold 25 units Replacement cost $65 Beginning Inventorr une December December 31 30
A $2,275
B $1,625
C $1,875
D $1,125

Answer 1

Answer:

B $1,625

Explanation:

The computation of the ending inventory based on the lower-of-cost-or-market value is shown below:

The ending inventory units = Beginning inventory + purchase of inventory - selling units

= 15 units + 35 units - 25 units

= 25 units

So, the cost of ending inventory = ending inventory units × purchase price

= 25 units × $84

= $2,100

And, the market value equal to

= ending inventory units × replacement cost

= 25 units × $65

= $1,625

Based on the lower-of-cost-or-market value, the ending inventory would be $1,625