Question

Murphy, Inc. had the following balances and transactions during 2017. The company maintains its records of inventory on a perpetual basis using the last-in, first-out inventory costing method. Calculate the amount of ending Merchandise Inventory at December 31, 2017 using the lower-of-cost-or-market rule. Supporting Materials / Group of answer choices $1,275 $1,340 $1,005 $2,010

Answer 1

$1,005

Step-by-step explanation:

beginning inventory 10 units at $72 = $720

June 10th, purchased 20 units at $85 = $1,700

December 30th, sold 15 units

December 31st, replacement cost = $67

The lower of cost or market rule states that the inventory should be valued at the lowest between purchase cost or market price.

In this case, the purchase cost using LIFO:

10 units at $72 = $720

5 units at $85 = $425

total = $1,145

replacement cost = 15 units at $67 = $1,005

the lowest value is the replacement cost = $1,005