Question

Better Buy, Inc. has 7 units in inventory on December 31. The units were purchased in November for $160 each. The price lists from the suppliers indicate that the same items would now cost the company a total of $1,155. What would be the amount reported as Ending Merchandise Inventory on the balance sheet?

Answer 1

$1,120

Step-by-step explanation:

Ending Merchandise Inventory is value of closing inventory in hand, to be valued at lower of cost or net realizable value or replacement value

Here, cost of closing inventory = 7 units X $160 each = $1,120

Since current realizable/ replacement value = $1,155

Cost is less than realizable value, therefore cost will be considered.

Thus ending merchandise inventory will be valued at total of $1,120.