Question

​Misty, Inc. had 22,000 units of ending inventory that were recorded at the cost of $ 6.00 per unit using the FIFO method. The current replacement cost is $ 4.25 per unit. What amounts would be reported as Ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market ​rule?

Answer 1

Inventory 93,500

Step-by-step explanation:

lower-of-cost-or-market ​rule

The accounting will valuate the invnetory comparing their original cost with the current reposition cost, which is the marketvalue.

It is comparing "How much was?" with "How much is?"

And picking the lower amount, this means, if the price increase, it doesn't recognize any gain , because it will pick the lower.

and when the price decrease it will reocgnize the loss, because market price is lower than original cost.

6 < 4.25 we pick the market price

4.25 x 22,000 = 93,500