Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615



Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem

Using the following data, how should the merchandise be valued under lower of cost or market?

Original cost $1,350
Estimated selling price 1,475
Selling expenses 180

To determine

Lower of cost or market value:

The lower-of-cost-or-market value is a method which requires the reporting of the ending merchandise inventory in the financial statement of a company, at its current market value (net realizable value) or at its historical cost price, whichever is less.

To calculate: merchandise cost under lower-of-cost-or-market value.


Here the merchandise cost must be taken as the value of market value or cost price whichever is less. The original cost is $1,350 (or) the market price (Net realizable value) is $1,295.

Thus, merchandise should be valued at its market value of $1,295...

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