Question

A company has 150 units of inventory on hand at the year end. The original purchase price was $60 per unit. Due to economy downturn, the company estimates that the inventory currently can only be sold at $50 per unit in the market. The amount of ending inventory is valued at

Select one:
a. $1,500
b. $9,000
c. $9,500
d. $7,500

Answer 1

The ending inventory should be valued at the market price of $50 per unit instead of the cost price since it is lower. The correct answer is $7,500.

Step-by-step explanation:

The question pertains to the valuation of ending inventory in a business setting, considering the lower of cost or market rule. The company has 150 units of inventory, with the original purchase price being $60 per unit. However, the current market price has dropped to $50 per unit. The valuation of ending inventory should be done at the market price, given that it is lower than the cost, leading to a valuation of 150 units × $50 per unit = $7,500. So, the correct answer to the question is d. $7,500.