Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or…

Santana Rey of Business Solutions is evaluating her inventory to determine whether it must be adjusted based on lower of cost or market rules. Business Solutions has three different types of software in its inventory and the following information is available for each.

 

 

Per Unit

Inventory Items

Units

Cost

Market

Office productivity

3

$ 76

$ 74

Desktop publishing

2

103

100

Accounting

3

90

96

Required

1. Compute the lower of cost or market for ending inventory assuming Rey applies the lower of cost or market rule to inventory as a whole. Must Rey adjust the reported inventory value? Explain.

2. Assume that Rey had instead applied the lower of cost or market rule to each product in inventory. Under this assumption, must Rey adjust the reported inventory value? Explain.

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