Question
When a business purchases and records the cost of inventory, it is generally recorded and reported at historical cost. However, according to the Lower of
When a business purchases and records the cost of inventory, it is generally recorded and reported at historical cost. However, according to the Lower of Cost of Market (LCM), every business must record the inventory at its current market price or the original cost. The situation usually applies when there is a decline in market prices or when inventory becomes obsolete.
Ace Inc. has 10 units of Product A. The original cost of Product A inventory is $50 per unit and the current replacement cost is $45 per unit. Applying the lower of cost or market, the company should report $_____ to reflect the valuation of its 10 units of Product A ending inventory.
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