Lower-of-cost-or-market rule
Guzman Company carries three inventory items. The following information pertains to the ending inventory:
Item | Quantity | Unit Cost | Unit Market Value |
O | 200 | $10 | $ 9 |
J | 250 | 15 | 14 |
R | 175 | 5 | 8 |
Required
a. Determine the ending inventory that will be reported on the balance sheet, assuming that Guzman applies the lower-of-cost-or-market rule to individual inventory items.
b. Prepare the necessary journal entry, assuming the decline in value is immaterial.
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