Question

Lower of Cost or Market The accountant for Murphy Company prepared the following analysis of its inventory at year end: Item Units Cost per Unit Net Realizable Value RSK-89013 600 $38 $47 LKW-91247 420 47 40 QEC-57429 510 26 32 Required: 1. Compute the carrying value of the ending inventory using the lower of cost or market method applied on an item-by-item basis.

Answer 1

Answer:

  $52,860

Explanation:

The computation of the ending inventory using the  lower of cost or market method is shown below:

Product                    Cost           Net realizable value Lower of cost or NRV

RSK-89013 600 × $38 = $22,800 600 × $47 = $28,800   $22,800

LKW-91247 420 × $47 = $19,740     420 × $40 = $16,800        $16,800

QEC-57429  510 × $26 = $13,260    510 × $32 = $16,320         $13,260

Carrying value of the ending inventory is                                       $52,860