Mallard Auto Parts, Inc. has on hand 1,000 fenders for 1953 Studebakers. Mallard

Question

Mallard Auto Parts, Inc. has on hand 1,000 fenders for 1953 Studebakers. Mallard purchased the fenders in 1965 for $30 each, and the selling price is $400 each. Only rarely does Mallard sell a Studebaker fender, and it is highly unlikely that more than 100 of the remaining fenders will ever be sold. However, Mallard has ample storage space and feels an obligation to Studebaker owners. Therefore, the company will NOT salvage the fenders and will continue to sell them for $400 each. Scrap value of the fenders is $5 each. Under the lower-of-cost-or-market inventory method: Mallard can expense the 900 excess fenders. Mallard can expense all 1,000 of the fenders because of the unlikelihood that they will be sold. the fenders should be valued at $7,500 [(100 x $30) + (900 x $5)]. the fenders should be valued at $5,000 (1,000 x $5) None of the above

Explanation / Answer

the fenders should be valued at $7,500 [(100 x $30) + (900 x $5)].

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