Question

Data related to the inventories of Kimzey Medical Supply are presented below: Surgical Surgical Rehab Rehab Equipment Supplies Equipment Supplies Selling price $ 260 $ 120 $ 340 $ 165 Cost 170 90 250 162 Replacement cost 240 80 235 158 Costs to sell 30 5 25 10 Normal gross profit ratio 30 % 30 % 30 % 20 % In applying the lower of cost or market rule, the inventory of surgical equipment would be valued at:

Answer 1

$170

Step-by-step explanation:

Kimzey Medical Supply's merchandise inventory:

Surgical equip. Surgical supplies Rehab equip. Rehab supplies

Selling price $260 $100 $340 $165

Cost $170 $90 $250 $162

If we apply the lower of cost or market rule for determining the value of surgical equipment, its value would be: $170 < $260

When we use the lower of cost or market rule, we should value our inventory at the lowest value between original purchase cost and current price.