Question

Alfalfa Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories:
Product Cost Market
A $110,000 $120,000
B 80,000 76,000
C 155,000 162,000
If Alfalfa applies the LCM basis, the value of the inventory reported on the balance sheet would be:

a. $341,000.

b. $345,000.

c. $358,000.

d. $362,000.

Answer 1

Answer:

a. $341,000.

Explanation:

As we know that the inventory should be valued at cost or market value whichever is lower and the same is shown below:

Product                  Cost                Market             Lower value of cost or market

A                           $110,000           $120,000       $110,000

B                            $80,000           $76,000         $76,000

C                            $155,000          $162,000      $155,000

Value of the inventory                                          $341,000