Question

1. Data related to the inventories of Ace Medical Supply are presented below: (Ace uses FIFO for their inventory)

		Surgical				Rehab
		Supplies				Equipment
Selling price		$	100			$	340
Cost			90				250
Costs to sell			15				25

In applying the lower of cost or net realizable value rule, the inventory of rehab equipment would be valued at:

1. $315.
2. $340.
3. $225.
4. $250.

Answer 1

The right option is "d. $250".

Cost = $250

Net realizable value = Selling price - Costs to sell = $340 - $25 = $315.

Therefore, if we apply the rule of lower of cost or net realizable value, the cost of $250 comes out to be the lower of the two. The inventory of rehab equipment would be valued at $250.