Lesson: Lower of Cost or Market Example

In this lesson, Nick Palazzolo, CPA, takes you through a practical application of the lower of cost or market method, using a straightforward example with four inventory items labeled A, B, C, and D. He clarifies how to compare and use the historical cost, replacement cost, ceiling, and floor to determine the market value of each item. As Nick sifts through the numbers, he exemplifies choosing the middle value as the market value and how it compares against the historical cost to decide the final inventory value. He wraps up by emphasizing the importance of consistency in applying the lower of cost or market method to inventory, whether it's to individual items, categories, or the inventory as a whole.