A Company Sells Four Products: I,II,III,and IV

question 33

Multiple Choice

A company sells four products: I,II,III,and IV.The company values all inventories using the lower-of-cost-or-market procedure.The company has consistently experienced a profit margin of 20 percent of sales and expects this rate to hold for the future.Additional information,shown below,is available for the most recent year as of December 31.

-See information regarding the four products above.Using the lower-of-cost-or-market procedure,what is the reported inventory value at December 31 for one unit of Product I?

• A) $90
• B) $80
• C) $70
• D) $60

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Definitions:

Investment Income

Income earned from investments such as dividends on stocks, interest on bonds, or rental income from property.

Equity Method

The equity method is an accounting technique used for recording investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the investing company’s share of the investee’s profits or losses.

Carrying Value

The original cost of an asset, less any accumulated depreciation, amortization, or impairment costs, representing its value on the balance sheet.

Investment Account

A financial account held at a financial institution that contains securities, cash, and other assets, typically used for investing purposes.