Question

Martha, Inc. had 24,000 units of ending inventory that were recorded at the cost of $7.00 per unit using the FIFO method. The current replacement cost is $4.25 per unit. The amount that would be reported as ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule is ___________.

Answer 1

The amount that would be reported as ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule is $102,000.

Using this formula

Ending Merchandise Inventory= Units of ending inventory× Current replacement cost per units

Let plug in the formula

Units of ending inventory=24,000 units

Current replacement cost per units=$4.25 per units

Let plug in the formula

Ending Merchandise Inventory= 24,000 units ×$4.25 per units

Ending Merchandise Inventory= $102,000

Inconclusion the amount that would be reported as ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule is $102,000.

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