Better Buy has six CD players in inventory on December 31.The players were purch

Question

Better Buy has six CD players in inventory on December 31.The players were purchased in November for 170 dollars.The price lists from suppliers indicate the current replacement cost of a Cd player to be 168 dollars.What is the effect on gross profit if Better Buy values its ending merchandise inventory using the lower -of-market rule ?

a) The cross profit would decrease by 12dollars

b)The gross profit would not be affected.

c)The cross profit would increase by 2 dollars.

d)The gross profit would increase by 12 dollars

Explanation / Answer

The Answer is (a) - " The cross profit would decrease by 12dollars "

Calculations = 6 CD Players x $2 per CD Player = $12

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