Question

Blossom 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 $135000 $142000 B 94000 90000 C 189000 191000 If Blossom applies the LCM basis, the value of the inventory reported on the balance sheet would be

Answer 1

$414,000

Step-by-step explanation:

Product Cost Market

A $135000 $142000

B $94000 $90000

C $189000 $191000

When a company uses the lower of cost or market rule in order to report their inventory level, they must calculate it based on which is lower, the purchase cost or the market value.

In this case, the company should report products A and C at cost (which are lower than market value), but it should report product B at market value because it's lower.

ending inventory = $135,000 + $90,000 + $189,000 = $414,000