A firm uses LIFO for inventory costing. The beginning inventory balance of the firm was 700. During the period, it purchased inventory worth 320 and sold goods worth 270. The market value of the inventory at the end of the period was 650. The total inventory expense during this period was ________.
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A. B. C. D.A
In this problem, you have to recognize the fact that inventory is valued at the end of an accounting period at the lower of cost or market (LCM). The write-down that occurs if the market value is lower than cost is charged to the income. In this case, the COGS equals 270 (given). If the LCM were ignored, the ending inventory would have been valued at 700 + 320 - 270 = 750. However, due to the lower market value of 650, inventory gets written down to 650 and the loss of
100 in inventory is charged to income. Thus, the total inventory expense equals 270 + 100 = 370.