Chapter 6, Problem E6.21E

Applying the lower-of-cost-or-market rule to merchandise inventories

Learning Objective 4

Clarmont Resources, which uses the FIFO inventory costing method, has the following account balances at May 31, 2019, prior to releasing the financial statements for the year:

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Merchandise Inventory, ending		$ 13,500
Cost of Goods Sold			68,000
Net Sales Revenue			123,000
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Clarmont has determined that the current replacement cost (current market value) of the May 31, 2019, ending merchandise inventory is $12,400.

Requirements

1. Prepare any adjusting journal entry required from the information given.
2. What value would Clarmont report on the balance sheet at May 31, 2019, for merchandise inventory?