Answer:
$1,200
Explanation:
purchase cost net realizable value LCM
unit A $650 $685 $650
unit B $625 $550 $550
total $1,275 $1,200
When you apply the lower of cost or market value, you must value your inventory at whichever is lower between historic cost (purchase cost) and the net realizable value (NRV). Any adjustments made will increase cost of goods sold and decrease inventory. In this case, the adjusting journal entry should be:
Dr Cost of goods sold 75
Cr Inventory 75