Question

Jeri company sells three different categories of tools (small, medium and large). the cost and market value of its inventory of tools are as follows. cost market small $ 64,000 $ 61,000 medium 290,000 260,000 large 152,000 167,000 determine the value of the company's inventory under the lower-of-cost-or-market approach.

Answer 1

The inventory value of the company amounts to $473,000 using the approach of lower of cost or market.

Step-by-step explanation:

The approach of lower of cost or market states that the business need to record the inventory or merchandise cost at whichever cost is lower or low, the current market price or the original cost of the inventory.

So, in this case,

Evaluating the inventory value as:

Small Market $64,000 $61,000

Medium Market $290,000 $260,000

Large Market $152,000 $167,000

So, from small market, the lowest value is $61,000, from the medium market, the lowest value is $260,000 and the from the large market, the lowest value is $152,000. Therefore, the inventory value is as:

Inventory value = $61,000 + $260,000 + $152,000

Inventory value = $473,000