Question

Bates Manufacturing purchased merchandise inventory for $10,000. At the end of the accounting period it has a market value of $8,700. Using the lower-of-cost-or-market rule, what is amount to report on the Balance Sheet as Merchandise Inventory?

Answer 1

$8,700

Step-by-step explanation:

According to the accounting principle, the inventory should be valued at lower of cost or market value and the same is presented on the balance sheet.

The purchase value of inventory is $10,000

And, the market value of inventory is $8,700

So, the lower value would be $8,700 and the same is reported on the balance sheet