Question

Your company has 500 units in inventory that were purchased for $12 each. These units have a current market value of $15 each. Your supplier has just announced a price increase to $16.50 that will go into effect at the beginning of next year. Management should:

A) make no adjustments to the inventory account.

B) adjust the inventory account using the lower of the recent market values, which is $15.

C) adjust the inventory account using the cost, which is $12.00.

D) adjust the inventory account using the average of the recent market values, which is $14.50.

Answer

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