Question

At year end, CurlZ, inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box. Market values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. should report its inventory at ___________.

1) 1,040
2) 1,000
3) 1,200
4) 1,240

Answer 1

CurlZ, Inc. should report its inventory at $1,040, the lower amount between cost and market value, fulfilling the conservative principle of inventory valuation.

Step-by-step explanation:

At year end, CurlZ, inc. should report its inventory at the lower of cost or market value, according to the conservative principle of inventory valuation. The cost of the inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box, which amounts to $200 for CleanZ and $1,000 for DyeZ, totaling $1,200. However, the market values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. The market value would be $240 for CleanZ and $800 for DyeZ, totaling $1,040. Therefore, CurlZ, Inc. should report its inventory at $1,040, which is the lower amount between cost and market.