Problem

Lower-of-cost-or-market ruleGuzman Company carries three inventory items. The following in...

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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