Question

Alfalfa Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: Product Cost Market A $110,000 $120,000 B 80,000 76,000 C 155,000 162,000 If Alfalfa applies the LCM basis, the value of the inventory reported on the balance sheet would be

Answer 1

$341,000

Step-by-step explanation:

The lower of cost or market (LCM) is an inventory valuation method that values and records inventories on the balance sheet date at either the historical cost or the market value.

Note that this question is merged together, but it first separated first before answering the question as follows:

For product A, Cost price is $110,000, while Marker price is $120,000. Since the Cost price of $110,000 is lower, it therefore used to value and report Product A.

For product B, Cost price is $80,000, while Market price is $76,000. Since the Market price of $76,000 is lower, it therefore used to value and report Product B.

For product C, Cost price is $155,000, while Market price is $162,000. Since the Cost price is $155,000 is lower, it therefore used to value and report Product C.

Therefore, we have:

The value of the inventory = $110,000 + $76,000 + $155,000 = $341,000

Therefore, the value of the inventory reported on the balance sheet would be $341,000.