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	540	$38		$44
LKW-91247	329	49		45
QEC-57429	462	25		33

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. $

Feedback

1. Compare actual cost of inventory to its market value. The lower amount is the value of inventory. If market value is lower, the inventory account is adjusted.

2. Prepare the journal entry required to value the inventory at lower of cost or market.

	Cost of Goods Sold
	Inventory
	(Inventory adjustment to market value)