Question

Applying the lower of cost or market method, the reported value of this company's ending inventory if LCM is applied to individual items is _____.

Answer 1

Answer: $870

Explanation:

Using the lower of cost or market method, the prices the items will be recorded at will be:

• Item 1 = $45 market price
• Item 2 = $60 cost price
• Item 3 = $25 market price

The total inventory will therefore be:

= Total value of item 1 + total value of item 2 + total value of item 3

= (45 * 5) + (60 * 7) + (9 * 30)

= 225 + 420 + 225

= $870