If a Company Values Inventory at the Lower of Cost

question 62

Multiple Choice

If a company values inventory at the lower of cost or market,which of the following is the value of inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole.

• A) $6,960
• B) $7,700
• C) $6,540
• D) $7,280

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Definitions:

Treasury Stock

Shares that were once part of the outstanding shares but were bought back by the issuing company.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Paid-In Capital

The total amount of money that a company has received from shareholders in exchange for shares of stock, exceeding the par value of the shares.

Stock Split

An action by a company to increase the number of its outstanding shares by issuing more shares to current shareholders, usually to make the stock more affordable.