Question

At Hawkeye Security, using the lower-of-cost-or-market rule, what would be recorded as the inventory value for a basic security system for home use with specific cost details?

a) $125
b) $160
c) $145
d) $150

Answer 1

Using the lower-of-cost-or-market rule, the inventory value for a basic home security system at Hawkeye Security would be recorded at $125, which is the lowest figure among the provided options.

Step-by-step explanation:

The lower-of-cost-or-market rule is an accounting principle that dictates the value of inventory should be recorded at the lesser of its historical cost or its current market price. When applying this rule to the inventory of a basic security system for home use at Hawkeye Security, you would need to compare its historical cost to its current market price and choose the lower value to determine what would be recorded as the inventory value.

If the historical costs of the security system and the current market prices are represented by options a) $125, b) $160, c) $145, and d) $150, the lowest of these values is $125. Therefore, according to the lower-of-cost-or-market rule, $125 would be recorded as the inventory value for the security system.