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Data related to the inventories of Kimzey Medical Supply are presented below: Surgical Equipment $ 260 170 Surgical Supplies $ 120 Selling price Cost Replacement cost Costs to sell Normal gross profit ratio 90 Rehab Equipment $ 340 250 235 25 30 % Rehab Supplies $ 165 162 158 240 80 30 30% 10 30 % 20 % In applying the lower of cost or market rule, the inventory of surgical equipment would be valued at:_________
A) $170.
B) $152.
C) $230.
D) $240.

Respuesta :

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Answer: A) $170

Explanation:

In applying the Lower of Cost or Market Value, inventory is valued at the amount that is lower between the current market value or the cost of the inventory and recorded in the balance sheet.

Market Value can be calculated as the current value minus the cost to sell.

From the above question, the value of the Surgical Equipment is $260 and the cost to sell is $30.

That means that the Market Value is,

= 260 - 30

= $230

This figure is larger than the cost of the Surgical Equipment which is $170 so to record the inventory according to the Lower of cost or market rule, the $170 is picked as it is lower.

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