Question

Birk Camera Shop Inc. uses the lower-of-cost-or-market basis for its inventory. The following data are available at December 31.

Units
Cost/Unit
Market Value/Unit
Cameras
Minolta 5 $170 $158
Canon 7 145 152
Light Meters
Vivitar 12 125 114
Kodak 10 120 135

What amount should be reported on Brik Camera Shop's financial statements, assuming the lower-of-cost-or-market rule is applied?
Total
$

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Answer 1

Answer:

The total amount should be reported on Brik Camera Shop's financial statements, assuming the lower-of-cost-or-market rule is applied is $4,373

Explanation:

According to the lower-of-cost-or-market rule, the inventory should be reported a lesser amount of cost or market value.

So,

For Cameras:

Minolta = $158 × $5 = $790

Canon = $145 × $7 = $1,015

For Light Meters

Vivitar  = 12 × 114  = $1,368

Kodak = 10 × 120 = $1,200

So, the total amount would be

= $790 + $1,015 + $1,368 + $1,200

= $4,373